Colm Fagan
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A few weeks ago, I was one of three people from three different continents (Australia, Europe, America) invited to speak on AE at an international pensions conference - which was hosted on a fourth continent (Africa)! Here is the link to the discussion: https://youtu.be/YQwEfM24hYQ
My advice to the attendees was simple: "Don't do as Ireland did!" Ireland got AE badly wrong in three main areas:
1. Government made the pensions tax system even more complicated by having different tax regimes for AE and conventional pensions. It is impossible for some workers to decide whether they would be better off in a conventional DC pension or in AE.
2. The scheme only pays a lump sum at retirement, which retired workers must then hawk around the market if they want a pension. The paper that Brian Woods and I presented to the Society of Actuaries in Ireland showed how this can result in retirees being "lured into gambling with their savings". The AE scheme MUST provide a pension.
3. The government's proposal treats AE as "just" another DC pension. It completely ignores the vital importance of assured positive cash flows for decades to come. Members' pensions can be more than doubled - and protected from the ravages of inflation - by investing entirely in real assets before and after retirement - PROVIDED THAT the lottery effect (for joiners and leavers) caused by fluctuating market values can be overcome.
Government rejected my solution to this problem, which would save the country over €2 billion a year. They rejected the verdict of the jury for the Institute and Faculty of Actuaries' Redington Pensions Prize competition for no good reason, their best explanation being that it had never been done before anywhere in the world. They consistently refused my request for a genuinely independent review of my proposal, e.g., by the ESRI.
PS: I wonder why I was never invited to speak on AE at a pensions conference in Ireland. Surely, the "Pensions Establishment" didn't feel threatened by my proposal?
My advice to the attendees was simple: "Don't do as Ireland did!" Ireland got AE badly wrong in three main areas:
1. Government made the pensions tax system even more complicated by having different tax regimes for AE and conventional pensions. It is impossible for some workers to decide whether they would be better off in a conventional DC pension or in AE.
2. The scheme only pays a lump sum at retirement, which retired workers must then hawk around the market if they want a pension. The paper that Brian Woods and I presented to the Society of Actuaries in Ireland showed how this can result in retirees being "lured into gambling with their savings". The AE scheme MUST provide a pension.
3. The government's proposal treats AE as "just" another DC pension. It completely ignores the vital importance of assured positive cash flows for decades to come. Members' pensions can be more than doubled - and protected from the ravages of inflation - by investing entirely in real assets before and after retirement - PROVIDED THAT the lottery effect (for joiners and leavers) caused by fluctuating market values can be overcome.
Government rejected my solution to this problem, which would save the country over €2 billion a year. They rejected the verdict of the jury for the Institute and Faculty of Actuaries' Redington Pensions Prize competition for no good reason, their best explanation being that it had never been done before anywhere in the world. They consistently refused my request for a genuinely independent review of my proposal, e.g., by the ESRI.
PS: I wonder why I was never invited to speak on AE at a pensions conference in Ireland. Surely, the "Pensions Establishment" didn't feel threatened by my proposal?
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