Society of Actuaries says the State's pension system is unsustainable in its current form

Protocol said:
You are suggesting here that PRSI finances just the State Pension.

Note that PRSI must finance many other benefits as well, e.g.

JSB
Illness benefit
Carers benefit
etc.
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I know, but truth be told middle to high earners rarely draw on these. I'm not being dismissive, but I don't know a single person who has ever availed of any of those benefits.
 
"What about Maternity benefit"


I can name at least 7 of of my friends (married and single) who don't fall into this category - maternity benefit. Neither do I.

Marion
 
There are different types of dependencies – not all of which are age-related.

The dependency ratio is not just demographic but also economic.

Many 18-65 year-olds are non-contributors because they are in education, incapacitated or unemployed, etc., and depend on State interventions.

Many people over 65 still work or generate taxable income from a variety of sources.

One must also take account of the impact of ever improving technology on economic output and consequentially the ability of fewer people to generate greater output and support higher numbers of non-contributors.

One cannot compare the economic output, or indeed the global reach of people from the 1930s, 1940s or 1950s with those of 2015. Modern technology allows much greater output per person.

Looking at this subject solely from the point of view of demographics is a mistake.
 
[QUOTE="Sophrosyne, post: 1456166, member: 79526"

The dependency ratio is not just demographic but also economic.[/QUOTE]

No doubt but pensions are very definitely age-related.

Whether or not the broader social welfare system is sustainable is a different issue.
 
Sophrosyne said:
There are different types of dependencies – not all of which are age-related.

The dependency ratio is not just demographic but also economic.......Looking at this subject solely from the point of view of demographics is a mistake.
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I'd just like to applaud Sophrosyne on his commentary.......the headline figures of numbers employed v. pensioners is overly simplistic.
 
Dan Murray said:
.......the headline figures of numbers employed v. pensioners is overly simplistic.
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Well, there is obviously a strong correlation between the numbers in the labour force and the level of pension-related PRSI receipts.

The Central projection in Milliman's analysis is that the excess of expenditure on State pensions (contributory and non-contributory) over pension-related PRSI receipts will increase by over 2% of GDP within the next 30 years, rising by a further 1% of GDP in the following 20 years. Expenditure on health care and long-term care provision is also projected to increase significantly as a % of GDP during this period as the population ages.

These projections are entirely consistent with similar reports produced by the OECD, McKinsey, the Department of Finance and others. It is surely beyond any reasonable doubt that the value of State pensions will have to be reduced in real terms in the coming decades in order to be sustainable.

I personally do not think it is fair and equitable that young workers alone should suffer this reduction in future benefits.
 
Sarenco said:
Well, there is obviously a strong correlation between the numbers in the labour force and the level of pension-related PRSI receipts.
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Of course that's true - who has said or implied otherwise? The point I understood Sophrosyne is making is the need to contextualise all dependency ratios and economic output more broadly. Hence what he said that concentrating solely on (one aspect) of demographics is incomplete.
 
Dan Murray said:
Hence what he said that concentrating solely on (one aspect) of demographics is incomplete.
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Fair enough but pension payments (as opposed to other forms of social assistance) are only relevant to one demographic cohort and that cohort is projected to increase significantly, relative to all other cohorts in the coming decades.

I take the point that what matters, ultimately, is whether the economy can sustain a given level of pension provision, which is why the projections are typically framed in terms of % of GDP rather than simply referring to the ratio of over 65s to the balance of the population.
 
Sarenco said:
Fair enough but pension payments (as opposed to other forms of social assistance) are only relevant to one demographic cohort and that cohort is projected to increase significantly, relative to all other cohorts in the coming decades.

I take the point that what matters, ultimately, is whether the economy can sustain a given level of pension provision, which is why the projections are typically framed in terms of % of GDP rather than simply referring to the ratio of over 65s to the balance of the population.
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Exactly Sarenco.

All Sophrosyne and I are saying is that it would be nice to see a broader analysis - ideally with stochastic modelling and not focussing exclusively on one single important dynamic. (Everyone knows the headline demographics!) The reports from Milliman, McKinsey and Society of Actuaries are reasonable to a point - it's just that they are too narrow in their scope. Frankly they lack multi-disciplinary input. I know some of the people involved in the Society of Actuaries initiative (all actuaries with no serious economics pedigree) and the lead author in the McKinsey study has a Phd in.......molecular biology (presumably a very clever lady but still?). One can assume Milliman is very heavily actuarially biased also? So they all examine and find broadly the same thing......unsurprisingly.

As an aside, why did the Society of Actuaries not ever produce a report, in bygone years, in relation to the sustainability of privately funded DB plans when those plans that have not already closed are forming an orderly queue to do so?!
 
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To be fair, Milliman's projections do incorporate specific assumptions regarding labour productivity growth and GDP growth over the modelled period. Beyond making some basic assumptions, I'm not sure that detailed economic forecasts/guesswork would add much to the picture.
 
Gordon Gekko said:
You disagree with the idea that 68 year olds now/in the future are fitter and "younger" than previous generations?
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Well we have rising obesity levels with all its associated complications, already half the population are overweight, there is too much drinking going on at home etc, people are eating too much processed and sugary foods. You only have to look at the average shopping trolly to get an idea of that. Will we all really be fitter and younger than previous generations, I doubt it very much.

I know very few present day 68 year olds who are as fit as a fiddle with no health concerns. I guess we will foresee a time when many of us will be limping into the office with our zimmer frames and walking sticks crippled with arthritis and what not, oh the joy of it all. :cool:
 
The 2012 report to the C&AG by KPMG on the social insurance fund includes a number of scenario tests in addition to the base case assumptions used to quantify the responsiveness of the results of the report to changes in the key underlying macroeconomic and demographic assumptions.

In particular, the report analyses the impact on the base assumptions of:-
  • Longevity changes
  • Migration changes
  • Fertility changes
  • Combination of fertility and migration changes
  • Range of macroeconomic assumptions
It is worth noting that the results are not particularly sensitive to alterations in the macroeconomic variables because changes to real earnings growth are assumed to commensurately effect productivity.

However, the results are particularly sensitive to the future population profile. Due to the expected dynamics of life expectancy, fertility, and migration rates, the age-structure of the population is projected to dramatically change in the coming decades. Not only is the population projected to be much larger than it is now, it is also expected to be much older. The pensioner support ratio commences at 5.3 in 2010 but reduces more gradually to 3.1 by 2040 and to 2.5 by 2060.

http://www.welfare.ie/en/downloads/2010actuarialreview.pdf
 
Moneybox.
Your comments on health are interesting ..
Could it be we will all snuff it before pension,thus
1.Save the state a fortune by sorting out pensions by dieing early.
or
2. Overwhelm our health services on overweight issues, heart , diabetes, etc.

It is hard to know, but I reckon we will muddle on and adjust as time moves on.
I wouldn,t put too much credence on economists/actuarial ramblings just yet.
I would take comfort that we know there are issues to be resolved.
 
Gerry Canning said:
I reckon we will muddle on and adjust as time moves on.
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That certainly reflects the current approach.

Of course that means that the necessary adjustments will largely be borne by younger members of society, without any significant impact on older cohorts (those already in retirement or close to retirement).

Does that seem fair?
 
Sarenco,

Largely it is fair,
The (older) cohort mostly rely on state old age pension ,which is not a kings ransom. This cohort clearly understood the ground rules on future pensions and where would we be if uncertainty replaces certainty? eg the stealing from private pension funds by government sent all the wrong messages and I fear less people will be inclined to make their own private provisions.
I am not comfortable with changing rules mid -stream but do readily acknowledge this issue needs to be addressed now .

If it turns out that we just cannot afford the present Old Age Pension , then it will be adjusted (gently) by not increasing it in line with inflation.
But remember how quickly your (younger members) will age and I hope our government have by then ensured that these (younger members) have somewhat self provided!
 
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