Because pensions are guaranteed benefits. So if you put it on a bond, and the bond goes down, you need to draw more taxes to make the difference.
Pensions are partially the outcome of wishful result-oriented thinking ("workers should have pensions they can depend on, so make the promise first and then the solution will happen").
That’s a bond. Why does that have anything to do with a pension ?
And who in his right mind plants a bond and links it to a pension ? How does that even work?
A bond is a loan. That means the firm or institution is taking a loan.
A pension is the opposite of that - it’s money taken from employee payments and added to a conservative fund with a time horizon of 20-30 years. This allows them to make long term plans which avoid the risks of high beta and risk stocks or deals.
So as your economy goes up, your fund goes up and you pay people off with the interest.
Something changed/went wrong, long before you got to the bond.
What do you think "conservative fund" is? It is a fund of bonds. What do you think pensions are?
There is nothing more "conservative" in investing than bonds ( particularly treasury bonds ).
Nobody "plants" a bond and links it to a pension. A pension buys bonds, stocks, etfs, etc which hopefully grows in value or pays healthy interest.
The problem is if the pension doesn't do as well as expected or the ratio of workers to retirees gets too skewed and they can't meet their defined payouts.
Funds for pensions are usually mix of stocks and bonds, but stocks are really bad for defined benefit contributions because in a downturn you will have to oversell. This is something that actually happened in 2008 and broke some pension funds in the U.S. So bonds would not have that issue (treasury bonds, low-risk bonds) so you have no volatility.
But even they will not produce enough for the benefits that are promised: as soon as someone outlives their contribution the fund might not be actuarially safe. It turns out it is exceedingly difficult to mitigate all risk in a retirement fund, and government makes the promise that if they fail, they will pass the bill to someone else.
Pensions are partially the outcome of wishful result-oriented thinking ("workers should have pensions they can depend on, so make the promise first and then the solution will happen").