In Reply to: Pensioner Preference Paradox posted by Joe76 on 09 December 2005 at 10:54:49:
Joe76,
I don't know the finance theory but those who do would probably say it is not that simple. In any company, if the "hurt" is reduced by delaying paying down a fund deficit then the investment does not go elsewhere, it goes to the same place later. You were probably talking about the case where a company reduces the benefits.
In that case the scenario you describe is one of the possibilities. The company might use the savings to buy back its own shares. If a company did that then, because as you say institutions like pension funds hold a lot of shares, other pension funds would see a gain.
However, that is only one of many things that some company might do. They might invest the money in new plant or staff, or spend it on raising morale. The ramifications are too various to foresee - even if the money went to executive bonuses the buying of yachts by the executives would contribute to some economy.
So while there might be a tendency for the degrading of one scheme to bolster the finances of another scheme, I don't think one can call it a solid cause-and-effect.
(Not with trustee hat on)