# McKinsey says State pensions unsustainable



## Sarenco (1 Oct 2015)

Ireland’s State pension system is unsustainable in its current form, according to international consultants McKinsey.

In a report published today, they say current contributions to the Social Insurance Fund from which the State pension is paid – mostly PRSI – “will be insufficient to continue to pay current levels of benefits in future years.”

They raise similar concerns about public sector pension arrangements where they forecast a threefold increase in the pension bill over the next 40 years.

“The cumulative deficit is estimated to rise to approximately €133 billion by 2040,” they state. Despite concerted efforts to reduce that deficit in recent years, “structural systematic reforms are required to effectively curb it”.

Maintaining payments at current rates would require an increase in contributions of five percentage points from all workers, McKinsey states. The alternative would be to cut benefits by around 35 per cent across the board.

Personally, I would like to see this topic become a key issue in the upcoming general election.


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## Asphyxia (1 Oct 2015)

It won't, housing however will be a key issue and politicans from all parties are starting to realise this.


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## 44brendan (1 Oct 2015)

Sarenco said:


> Maintaining payments at current rates would require an increase in contributions of five percentage points from all workers, McKinsey states. The alternative would be to cut benefits by around 35 per cent across the board.


Absolutely a key concern and a far more expensive one than many of the short term issues making headlines at the moment. Taking into consideration the high numbers of people with no private pensions this is only going to get worse as time progresses if not addressed.
A total review of the current pension system is needed as a matter of urgency (both public and private). The current system of tax incentives is seemingly not working in encouraging those in employment to put aside funds towards a pension. There needs to be some level of compulsory contributions at early stage of employment. The main difficulties in getting any political to put this on their manifesto is that it involves "income deductions" which will only be viewed as another tax. What we have been reliant on up to now is the increases in wages/those in employment being sufficient to meet the pension requirements ongoing. These increases obviously took a severe hit since 2008. However, a further difficulty is the increasing lifespan for us all. Our life expectation in recent years is getting longer which means that we will be drawing more per person from the communal pot. Obviously the longer this issue remains unaddressed the more difficult it will be to address it.


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## Asphyxia (1 Oct 2015)

I agree, but it still won't become a key issue in the upcoming election, no politician will bring it to the fore unless they wish to committ political seppuku.


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## cremeegg (1 Oct 2015)

The pensions issue looked at from the level of society as a whole is not about saving for retirement.

If the dependancy ratio goes from 6 workers to 1 retiree now, to 2 workers to 1 retiree in 40 years time, it will make no difference what savings those retirees have. There may be a difference between retirees who have savings and those who do not, but the issue is the ratio of workers to retirees.

Only large scale capital formation and productivity increases are the only possible way 2 workers can support one retiree.


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## Sarenco (1 Oct 2015)

cremeegg said:


> The pensions issue looked at from the level of society as a whole is not about saving for retirement.
> 
> If the dependancy ratio goes from 6 workers to 1 retiree now, to 2 workers to 1 retiree in 40 years time, it will make no difference what savings those retirees have. There may be a difference between retirees who have savings and those who do not, but the issue is the ratio of workers to retirees.
> 
> Only large scale capital formation and productivity increases are the only possible way 2 workers can support one retiree.



So should we do nothing at all? 

It seems to me that the most equitable way to address this impending crisis is to share the escalating cost between current and future retirees, in both the public and private sectors.

According to McKinsey, people in the bottom 40 per cent of household income do not suffer a fall in consumption power in retirement with the State pension replacing a large part of their pre-retirement spending.  Is that sustainable?

It is worth bearing in mind that Ireland scores well on poverty in a relative sense, with a poverty rate in retirement of 6.9 per cent that is lower than both the poverty levels for the Irish population as a whole and for retirees in most other OECD states.  As a society we are very generous to our retirees compared to most comparable countries but can we afford to continue to be this generous?


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## roker (1 Oct 2015)

40 years ago when I started paying it, it was to cover retirement, what happened to my 40 years of money?


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## Sarenco (1 Oct 2015)

If you are talking about PRSI contributions, the majority of the amounts contributed by you have been spent on pensions for OAPs, past and present.  We have a "pay as you go" system - the Social Insurance Fund is essentially an accounting convention.


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## IrishHusk (1 Oct 2015)

I think that this government did untold damage when they stole money from Private pension funds with the introduction of the pension levy. What is to stop them doing this again when they need easy money in the future. I believe unless there is some guarantee that pension funds are not to be touched why would anyone pay into a pension when the government can at any time can put a levy on what you have saved. In my situation I stopped paying AVC's when they did this and used the extra money to pay more of my mortgage as I believe those of us who are careful and save for our futures will end up paying on the double.


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## Steven Barrett (1 Oct 2015)

Sarenco said:


> Maintaining payments at current rates would require an increase in contributions of five percentage points from all workers, McKinsey states. The alternative would be to cut benefits by around 35 per cent across the board.
> 
> Personally, I would like to see this topic become a key issue in the upcoming general election.



There is no way they are going to either. Politics is a short term game, do what you need to get re-elected and start again. 

Pensions are a long term problem. Successive governments have simply kicked the can down the road. With the age of the current cabinet, they know they'll be well gone by the time that it becomes an unsustainable problem. 

What is the solution? Increase personal PRSI? It will be labelled as a tax. Increase employer PRSI? Be labelled as introducing barriers to employment. 

There are loads of reports on pensions in Ireland, which probably cost a fortune to produce. All are gathering dust. 

The government are the same as it's citizens. Put off doing something about pensions until it's too late. 


Steven
www.bluewaterfp.ie


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## Sarenco (1 Oct 2015)

Undoubtedly that's all true Steven but ultimately the electorate determines the agenda in a general election.  

Collectively we can't continue ignoring this growing problem.


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## Jim2007 (1 Oct 2015)

roker said:


> 40 years ago when I started paying it, it was to cover retirement, what happened to my 40 years of money?



Bad news it has always been a pay as you go system, that is until the music stops!


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## roker (1 Oct 2015)

Jim2007 said:


> Bad news it has always been a pay as you go system, that is until the music stops!


They took 2.5 billion from the pension fund for austerity


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## Steven Barrett (2 Oct 2015)

Sarenco said:


> Undoubtedly that's all true Steven but ultimately the electorate determines the agenda in a general election.
> 
> Collectively we can't continue ignoring this growing problem.



There was an article recently that 900,000 workers will retire without a pension. Generally, people's attitudes towards pensions are the same as the government, kick the can down the road and spend your money on other stuff. That is why I don't think it will become an election issue. People would prefer to have the cash in their pocket than fund for an OAP (which costs about €300,000 if you bought it privately). 

Mandatory pensions are the way to go. If people are told they have to join a scheme, they tend to do without much grumble. It's when they have a choice of spending or saving, they usually spend.

http://www.independent.ie/business/...private-pension-warns-new-study-31566474.html


Steven
www.bluewaterfp.ie


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## cremeegg (2 Oct 2015)

SBarrett said:


> Mandatory pensions are the way to go. If people are told they have to join a scheme, they tend to do without much grumble. It's when they have a choice of spending or saving, they usually spend.
> 
> Steven
> www.bluewaterfp.ie



Sorry Steven but you simply do not understand the problem.

If every retiree in 2050 had saved and saved during their working lives and owned piles of assets when they came to retire, that would have no effect whatsoever on the fact that the dependency ratio will change from 1 retiree to 6 workers today to 1 retiree to 2 workers in forty years time.

Retired people can never take one third of the income produced by the working two thirds.


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## Sarenco (2 Oct 2015)

SBarrett said:


> Mandatory pensions are the way to go. If people are told they have to join a scheme, they tend to do without much grumble. It's when they have a choice of spending or saving, they usually spend.



Steven

Mandatory private pensions (or auto-enrolment with a right to opt out) would certainly be a boon for the pension industry.  However, it would have absolutely zero impact on the sustainability or otherwise of the State's current pension liabilities.  

You may well be right that the State's pension liabilities will not become an issue in the forthcoming election.  That would be a pity in my opinion.


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## moneybox (2 Oct 2015)

cremeegg said:


> Sorry Steven but you simply do not understand the problem.
> 
> If every retiree in 2050 had saved and saved during their working lives and owned piles of assets when they came to retire, that would have no effect whatsoever on the fact that the dependency ratio will change from 1 retiree to 6 workers today to 1 retiree to 2 workers in forty years time.
> 
> Retired people can never take one third of the income produced by the working two thirds.


Would we have the option to what the Germans are doing, bring in thousands of young foreign workers to compensate for our aging population.


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## Jim2007 (2 Oct 2015)

cremeegg said:


> If every retiree in 2050 had saved and saved during their working lives and owned piles of assets when they came to retire, that would have no effect whatsoever on the fact that the dependency ratio will change from 1 retiree to 6 workers today to 1 retiree to 2 workers in forty years time.



Gee the Swiss must be awful stupid, 'cause that is what we do and yes of course it works. A Swiss state pension at the max makes up about 20% of a pensioner's annual income the rest comes from the assets you claim will make no difference, plus savings.  Mandatory pension contributions starts at age 25 (7%) and increases over the years until it reaches about 11% in your mid 50s  by law this is matched 100% by employers, but most actually contribute more often as high as 200%.


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## orka (2 Oct 2015)

cremeegg said:


> Sorry Steven but you simply do not understand the problem.


As an aside, I do find it a bit odd that you have another thread on the go bemoaning the poor quality of postings on AAM these days and then you are this rude/patronising to a poster who does indeed understand pensions and the problems surrounding their provision.  But I digress...


cremeegg said:


> If every retiree in 2050 had saved and saved during their working lives and owned piles of assets when they came to retire, that would have no effect whatsoever on the fact that the dependency ratio will change from 1 retiree to 6 workers today to 1 retiree to 2 workers in forty years time.


It is correct that significant personal savings won't affect the dependency ratio but they will mitigate the impact of the changing dependency ratio - which is what is important.  If people have significant assets saved, they can rely less on the state.  Relying on the state for 1/6 of your post-retirement income rather than 1/2 of it equalizes the impact of a dependency ratio changing from 6:1 to 2:1.


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## Sarenco (2 Oct 2015)

Absolutely agree orka but does this not imply that that the relative value of provision from the State will simply have to fall, at least in real terms, with private savings taking up the slack?  

This seems inevitable to me and the only question remaining is how we spread this escalating cost across the generations and between different sectors of the economy.

Incidentally, I don't mean to suggest that this is a uniquely Irish problem - all developed economies   will have to grapple with this issue.  What I find frustrating is the absence of any debate here on this issue - we won't have the excuse that nobody saw this coming.  Given our relatively favourable demographics, it is pretty depressing that the sustainability of our pension system is so poor relative to others (see attached chart).


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## cremeegg (2 Oct 2015)

Jim2007 said:


> Gee the Swiss must be awful stupid, 'cause that is what we do and yes of course it works. A Swiss state pension at the max makes up about 20% of a pension's annual income the rest comes from the assets you claim will make no difference, plus savings.  Mandatory pension contributions starts at age 25 (7%) and increases over the years until it reaches about 11% in your mid 50s  by law this is matched 100% by employers, but most actually contribute more often as high as 200%.



Unless the Swiss dependancy ratio has already reached 1 retiree to 2 workers this does not really address the point. ( I thought you were a Mayo man)

Saving may well be a solution at the level of the individual, though not if the state pension becomes means tested, but it does nothing at the level of society.


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## cremeegg (2 Oct 2015)

orka said:


> It is correct that significant personal savings won't affect the dependency ratio but they will mitigate the impact of the changing dependency ratio - which is what is important.  If people have significant assets saved, they can rely less on the state.  Relying on the state for 1/6 of your post-retirement income rather than 1/2 of it equalizes the impact of a dependency ratio changing from 6:1 to 2:1.



For two workers to produce the same output in 40 years time as 6 do today would require an increase in productivity of 3% per year every year for forty years. It makes no difference at the level of society whether income is channelled to retirees through state or private pensions.


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## cremeegg (2 Oct 2015)

orka said:


> As an aside, I do find it a bit odd that you have another thread on the go bemoaning the poor quality of postings on AAM these days and then you are this rude/patronising to a poster who does indeed understand pensions and the problems surrounding their provision.  But I digress...



I don't mean to be rude and I certainly don't doubt Steven's knowledge of the current pension system.

But the idea that increased savings can address the problem of a huge shift in the dependancy ratio simply does not stack up.


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## trasneoir (3 Oct 2015)

cremeegg said:


> But the idea that increased savings can address the problem of a huge shift in the dependancy ratio simply does not stack up.


Am I missing something here? _Sufficiently _increased savings could eliminate retiree's "dependancy" on workers, right? Or does inflation or some other macroeconomic factor torpedo this notion?


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## cremeegg (3 Oct 2015)

trasneoir said:


> Am I missing something here? _Sufficiently _increased savings could eliminate retiree's "dependancy" on workers, right? Or does inflation or some other macroeconomic factor torpedo this notion?



We are all dependant on the output of the economy to eat and consume. Output depends on workers, yes increased investment may increase output per worker but the demographic shift is so large that the level of increased productivity required is at the high end of what is likely to be possible.

Let me try an analogy. If 42 people live on a farm and 36 work and 6 are retired that describes the situation we have now. In 40 years time only 28 people will be working and 14 will be retired. That will be difficult. It does not really matter who owns the farm.

If we save up enough to buy the farm next door that does not help as we would still need people to work it and they have the same dependancy ratio.

The only way out is if we invent new machines so that the 28 workers in 40 years time can produce as much as the 36 today. That would require a large increase in productivity, for no increase in living standards.


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## Sarenco (3 Oct 2015)

Cremeegg

I'm still struggling to understand your argument.  Are you suggesting that workers today, in aggregate, cannot defer consumption to provide for their retirement? 

I take the point that a very high aggregate saving rate would adversely impact economic activity today but surely it's a question of balance so we can smooth the transition to a society with an older demographic profile?  There is not much we can do about the increasing dependency ratio but we can take steps to mitigate the impact of this change.

That is precisely what the world's most sustainable pension systems (New Zealand, Australia, Norway) are doing.  Are you suggesting that they are wasting their time?


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## cremeegg (3 Oct 2015)

Sarenco said:


> Are you suggesting that workers today, in aggregate, cannot defer consumption to provide for their retirement?



That is exactly what I am saying. I wish I had expressed it so well.

This isn't an economic issue, short of living on canned food in retirement it is a physical impossibility.



Sarenco said:


> I take the point that a very high aggregate saving rate would adversely impact economic activity today.



That may be true but I have not made that point.

Increased savings might lead to increased capital formation might lead to greater productivity in the future but it would have to happen on a large scale to be sufficient to address the problem. Current low interest rates suggest that there is no sign of that at present.




Sarenco said:


> That is precisely what the world's most sustainable pension systems (New Zealand, Australia, Norway) are doing.  Are you suggesting that they are wasting their time?



They may have a bigger slice of the pie than other countries in the future but it doesn't make the pie any larger.


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## Sarenco (3 Oct 2015)

cremeegg said:


> That is exactly what I am saying. I wish I had expressed it so well.



Ok but could you explain why? Surely we can chose to defer the point at which we decide to expend our collective capital.



cremeegg said:


> They may have a bigger slice of the pie than other countries in the future but it doesn't make the pie any larger.



I don't think anybody would argue that retirement provision would expand the pie.  Again, this is simply about temporal smoothing of consumption.


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## trasneoir (3 Oct 2015)

cremeegg said:


> Let me try an analogy. If 42 people live on a farm and 36 work and 6 are retired that describes the situation we have now. In 40 years time only 28 people will be working and 14 will be retired. That will be difficult. It does not really matter who owns the farm.


It's a nice analogy, but in "Farm Ireland" maybe 10 of your 36 workers are engaged in producing real value for humanity (stuff like agriculture, industry, infrastructure, transport, vital services). These are also the areas where automation and technology has (and will continue to have) the most impact. The amount of labour needed in the transport industry will plummet over the next 20 years, for example.

Several more of our 36 are producing luxuries that retirees would be happy to produce for free - art, community services, hospitality and the like.

The rest of our 36 are selling consumer debt, nail care, dog grooming, or suing one another. Stuff that adds little or no value to humanity, in other words.

If the major impact of this shrinking dependancy ratio in the west was a shift from the high street and office to the farm and the factory, well, good. The west can consume and waste an awful lot less resources and labour without any significant loss in welfare or happiness.

Am I naieve in thinking that, when pressed, the world will value farmers more and lawyers less?


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## Jim2007 (3 Oct 2015)

cremeegg said:


> Let me try an analogy. If 42 people live on a farm and 36 work and 6 are retired that describes the situation we have now. In 40 years time only 28 people will be working and 14 will be retired. That will be difficult. It does not really matter who owns the farm.



And your assumption is that everything must be produced on the one farm and there will be no productivity gains etc... If we maintain the current ratio into the future it is just as likely that we will be challenged to find meaningful work for people rather than the other way around.  So just a sidebar to the discussion.


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## cremeegg (3 Oct 2015)

Jim2007 said:


> And your assumption is that everything must be produced on the one farm and there will be no productivity gains etc



Have you read any of the previous posts? I have addressed the possibility of buying a second farm. You don't have to agree with my opinion, but please don't attribute an assumption to me which is clearly exactly opposite to my actual position.

Again productivity gains. I certainly do not assume that there will be no productivity gains. Increased productivity is the only way an increased dependancy ratio can be managed. I said this very clearly. 

The extent of the increased productivity required is very large. If the dependancy ratio goes from 6 to 1 to 2 to 1 each worker in 40 years time will have to produce three times more than each worker does today. And that is only to maintain living standards. That is a very tall order. And if we start by looking at increased savings as a solution we miss the point.



Jim2007 said:


> If we maintain the current ratio into the future...



Does any demographic projection suggest that this is likely?


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## cremeegg (3 Oct 2015)

trasneoir said:


> It's a nice analogy, but in "Farm Ireland" maybe 10 of your 36 workers are engaged in producing real value for humanity (stuff like agriculture, industry, infrastructure, transport, vital services). These are also the areas where automation and technology has (and will continue to have) the most impact. The amount of labour needed in the transport industry will plummet over the next 20 years, for example.
> 
> Several more of our 36 are producing luxuries that retirees would be happy to produce for free - art, community services, hospitality and the like.
> 
> ...



I absolutely agree with this concept, but there will be huge practical difficulties. Who is going to tell the lawyers that they are going to have to drive tractors. 

Are we educating young people to fill these roles?

There will be huge social dislocation associated with these changes.


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## Sarenco (3 Oct 2015)

Hi Cremeegg

I don't disagree with any of that but it still doesn't explain your position that workers cannot defer consumption to provide for their retirement.  To extend your farmyard analogy, surely workers can set aside the excess from harvests during their working life and can consume same during retirement?


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## cremeegg (3 Oct 2015)

Sarenco said:


> surely workers can set aside the excess from harvests during their working life and can consume same during retirement?



In my opinion they cannot. There is no store of value which would allow that to happen, short of taking the stored harvest literally.

Money is a claim on the future output of an economy, shares are a claim on the future output of a company. Neither increase that future output.

All of the food that will be eaten in 2050 all the goods and services that will be consumed, will have to be produced in 2050.


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## Sarenco (4 Oct 2015)

Hi Cremegg

It's certainly the case that money is simply a claim on products and services produced within an economy. However, where we part company is your thesis that the value of wealth (accumulated savings) cannot be maintained over time.

There is simply no historical basis for that projection.  Even cash has produced a real return of 1.5% per annum over a 50 year period (Barclays Equity-Gilt Study 2015) and equities and gilts have produced far greater long term real returns.  

If projected demographic changes result in a prolonged period of deflation across the developed world (if we all go Japanese), that should make it easier, and not more difficult, to preserve the real value of accumulated wealth in the future.

Products and services consumed in 2050 will certainly have to be paid for out of 2050 wealth but there is no reason to assume that 2050 wealth cannot be accumulated prior to 2050.


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## elacsaplau (4 Oct 2015)

Is there a link to the report in question?


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## cremeegg (4 Oct 2015)

Sarenco said:


> Even cash has produced a real return of 1.5% per annum over a 50 year period (Barclays Equity-Gilt Study 2015) and equities and gilts have produced far greater long term real returns.



Is this not because there has been real increase in the productive capacity of the economy, over the last 50 years. This will be very difficult to maintain in the face of a decreasing workforce.

I will have to think about the Japanese experience and deflation


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## Sarenco (4 Oct 2015)

elacsaplau said:


> Is there a link to the report in question?



https://wealth.barclays.com/en_gb/s...investing-lessons-from-114-years-of-data.html

http://www.telegraph.co.uk/finance/...nvestors-Barclays-Equity-Gilt-Study-2015.html

http://www.thisismoney.co.uk/money/...0-years-finds-Barclays-Equity-Gilt-Study.html


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## Sarenco (4 Oct 2015)

cremeegg said:


> Is this not because there has been real increase in the productive capacity of the economy, over the last 50 years. This will be very difficult to maintain in the face of a decreasing workforce.
> 
> I will have to think about the Japanese experience and deflation



Who is to say there won't be a real increase in the productive capacity of the economy over the next 50 years?

Re deflation, my point is really that if we see a very long term period of deflation (highly unlikely in my opinion), then a 2015 euro would purchase more goods and services in 2050, even without any investment returns in the intervening period.


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## elacsaplau (4 Oct 2015)

Thanks Sarenco

Sorry for being unclear. What I meant to ask for was for a link to the McKinsey report itself?!


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## cremeegg (4 Oct 2015)

Sarenco said:


> Who is to say there won't be a real increase in the productive capacity of the economy over the next 50 years?



I am certainly not saying that.

What I am saying is that in a scenario where we go from 6 workers for every 1 pensioner to 2 workers for every pensioner, only a huge increase in productivity will allow that reduced number of workers to support that increased number of pensioners. And I am also saying that pension savings will do nothing to help that at the level of society.

You started this thread by saying the impending pension crises should be a feature in the forthcoming election, and I agree completely.

Other posters then said that in response to the pensions crises we need to save more. I am trying to point out that this is factually incorrect.

Future living standards will depend on future economic output, pension savings at an individual level may get you a bigger share of that future economic output but they will not increase it.

Or as a wise person once said "In aggregate, people cannot defer consumption to provide for their retirement."


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## Rebuttal (4 Oct 2015)

I suppose due to prevailing economics of globalisation, the argument for euthanasia will start to be pushed onto society by our puppet masters, then the ratio of workers supporting pensioners will reduce.


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## Sarenco (4 Oct 2015)

elacsaplau said:


> Thanks Sarenco
> 
> Sorry for being unclear. What I meant to ask for was for a link to the McKinsey report itself?!



Sorry, I don't believe the report is available online - here's the Indo's article on the report:

http://www.independent.ie/business/...ve-to-cut-back-after-retirement-31572689.html


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## Sarenco (4 Oct 2015)

cremeegg said:


> Other posters then said that in response to the pensions crises we need to save more. I am trying to point out that this is factually incorrect.
> 
> Future living standards will depend on future economic output, pension savings at an individual level may get you a bigger share of that future economic output but they will not increase it.



I don't think anybody would argue that deferred consumption (savings) at an aggregate level should increase future economic output but it should ensure that future retirees receive an adequate share of that future economic output.  That's about all we can plan for in this context.

My broader point (and I think we might be in agreement here) is that the State simply will not be in a position to be as generous to retirees in the future as is currently the case, due to demographic changes.  It seems to me that the real question, therefore, is whether this should be borne exclusively by future retirees or whether this escalating cost should be shared across generations.


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## Sarenco (5 Oct 2015)

Here's a relatively brief article from McKinsey on the differing approaches of other developed countries on tackling the sustainability of their respective pension systems.


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## Sarenco (5 Oct 2015)

http://www.fiscalcouncil.ie/wp-content/uploads/2012/01/PreBudget_160915_Website_Final.pdf

The Fiscal Council has also repeatedly warned that the current profile of Government spending is not realistic in the medium term having regard for the additional costs associated with demographic changes - 2016 pre-budget submission attached.


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## orka (5 Oct 2015)

There was a similar thread a couple of months ago about there being no concern about the state’s unfunded pension liabilities. http://www.askaboutmoney.com/thread...e-states-unfunded-pension-liabilities.194889/

My view is that productivity won’t be sufficient to compensate for demographic changes and no government will start early enough to find a solution before it’s too late.  Therefore future retirees will fall into two broad groups – those who have made little/no provision for their own retirement and will have to survive on a considerably reduced subsistence pension; and those who HAVE made sufficient provision for their own retirement – these people will see their ‘paid-for-for-40/50 years state contributory pension’ slashed leaving them to live primarily on their own privately funded retirement income.  Neither prospect is appealing to me but as I don’t want a subsistence existence in my dotage, I’m going to look after myself.  I would love to think that my household will have 2 x €12K state pensions coming in as part of our retirement plans but we’re planning as if this will be zero – anything above that will be a bonus.

Overall, part of my post from the other thread still sums up where I personally am at in thinking about the undoubtedly huge future state pension issues:


orka said:


> I started off thinking that it's a huge problem and something should be done.  Now I still think it's a huge problem but from a selfish, personal point of view, I don't think it's in my interest for something to be done.  As a high earner, I can pretty much guarantee that any solution will involve me paying in a lot more than I would ever get back.  I am better off putting the cost of any solution into my own savings and looking after myself - in the full expectation that the contributory pension will be a lot lower/means-tested when I retire in 20/25 years time.


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## Sarenco (6 Oct 2015)

Hi Orka

I certainly understand your perspective but I find it pretty depressing to contemplate the prospect that a substantial proportion of future retirees can only look forward to a subsistence existence in their old age.

I also find the constant refrain that no government will tackle this issue somewhat defeatist.  This has been a major source of debate in most other developed countries and I remain hopeful (perhaps naively) that voices such as the Fiscal Counsil will ultimately be heard and will prompt a policy response from government.

Of course, the primary responsibility for forcing this issue onto the agenda rests with the electorate.


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## Sarenco (15 Oct 2015)

http://igees.gov.ie/wp-content/uplo...and-Related-Supplementary-Benefit-Schemes.pdf

I recently came across this 2014 paper by the Department of Public Expenditure and Reform on the medium-term sustainability of aspects of our State pension system that sets out certain options for structural reform.  There are some interesting figures and ideas in there for anybody that is interested in this area.


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## cremeegg (16 Oct 2015)

Talking about pensions.



orka said:


> I started off thinking that it's a huge problem and something should be done.  Now I still think it's a huge problem but from a selfish, personal point of view, I don't think it's in my interest for something to be done.  As a high earner, I can pretty much guarantee that any solution will involve me paying in a lot more than I would ever get back.  I am better off putting the cost of any solution into my own savings and looking after myself - in the full expectation that the contributory pension will be a lot lower/means-tested when I retire in 20/25 years time.
> 
> If good things come to pass and this is not an issue when I retire, happy days.  But I don't think hope is a great strategy so I would rather trust myself than politicians to look after me in retirement.



This is hugely important matter. It seems to me that the public service is breaking down due to concerns like this, and not just in the area of pensions.

My major concern at present is education. I have 3 children in secondary school. Lets be honest despite much hard work and effort by some individual teachers the Irish education system doesn't fulfil the aspirations of many Irish parents. Educational policy is all about inclusion, there is little emphasis on excellence.

The response for those who can afford it is to look outside the public system. This reduces the aspiration levels of parents generally within the public system, and leaves people who want more for their kids wondering why they are paying on the double.

The same situation applies in Health.


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## galway_blow_in (16 Oct 2015)

Sarenco said:


> So should we do nothing at all?
> 
> It seems to me that the most equitable way to address this impending crisis is to share the escalating cost between current and future retirees, in both the public and private sectors.
> 
> ...




the power of pensioners as a political force in this country is not only represented in the number of lobbyists that demographic has batting for them ( age action etc  ) but the narrative which dominates , beit from listening to politicans or even the general public , the received wisdom is that pensioners are badly off but that they more than paid for the level of benefits they currently draw down , both perceptions are almost entirely false

changing attitudes towards the pension time bomb is going to be a bigger task than the economic challenge the country faced from 2008 on , their is zero political will to deal with it and incredible ignorance amongst the general population with regard the reality of the situation


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