4.1. Pensions supplements as transfer program
One of the views on pensions is such that their individual amount depends from how much person saved during his active life and consequently that is how much he is going to get when he retires. That is the principle of merit. This way of securing individuals for their golden age is useful, promotes individual efforts to work and achieve as much as possible during his active life. It is OK if majority of people that worked hard will get from their pension system adequate result. If pension funds are seriously diminished as a result of depression, or continuous system suffers a fall in contributions during prolonged unemployment what happens is that buying power of future generation of pensioners is seriously crippled as well. And this is having serious effect on further economy growth during following decades. And this brings us to the second view on pensions and that is as an extremely important source of buying power and profit creation.
If we allow that through fall of value of shares, bonds the value of pension funds is permanently diminished and we will not take steps to supplement it, we are in fact arranging for decline in economy due to definitely diminished buying power of pensioners. And we are speaking about multimillion army of consumers with enormous potential.
Pensions are outstandingly important society wide factor because they represent further missing part of sales, which is contributing to profit creation as such.
Therefore supplementing the pensions as one kind of state transfers is an ideal way how to stimulate economic growth. If it is not realized, stagnation of whole industries of production and services follows, which would otherwise be prospering and providing jobs for millions. It is also morally correct as people who worked hard all their life, paid taxes should not be crippled because of recession caused by wrong macroeconomic government policies and embedded system faults which are directly causing these recessions to happen. Furthermore, inaction in this area is causing further deterioration in economy as a whole because of fall in buying power of pensioners.