I think this is the point. Ring fenced funding is an illusion at a national level. It is not to say that nations should not invest. But investing vast sums in foreign equities would generally not make the best economic sense and saying these belong to oldies and no-one else dare touch them makes even less sense.There is not much point in building up massive contingency funds for pensions - at the first sign of a crisis, no matter what, they would be raided and spent on whatever that day's issue was
No politician could withstand the pressure to raid the funds to provide for X, even though the funds are ring-fenced for Y
Let us dismiss the idea that because we have set aside a fund the State will be able to pay these obligations even if we can't afford it in the socio-political sense. I agree with @joe sod that this is delusion.Yes, but my question is specifically about PS pensions, not the State Pension.
Is there an argument to move towards funded PS pensions, rather than PAYG?
So maybe the argument is that the fund will enable us to afford it by adding to the nation's wealth. That raises the question of what funded the fund. If it was borrowing then we had taken on a massive geared investment,
3) is interesting. It is the most likely to ensure it is ring fenced. Not absolutely guaranteed. If workers are qu'ing at food banks the Government would have to find a way to raid these accounts.Hi Duke
Good question.
Borrowing the money makes no sense as you point out.
We need to raise the PRSI contributions substantially.
So what would we do with them?
I see three options:
1) Put them in a pension reserve fund - makes no sense when we have €200 bn of national debt.
2) Pay down our national debt so that we would be in a better position to pay the COAP
3) Put them in individual accounts so that the individual decides what to do with them.
Brendan
Many non-Federal Public Sector employees in the USA have their own pension funds and nearly all are grossly under funded. It's an interesting way of seeing the liability crystallised.3) is interesting. It is the most likely to ensure it is ring fenced. Not absolutely guaranteed. If workers are qu'ing at food banks the Government would have to find a way to raid these accounts.
But it might not have the political will/ability to do so. There will always be fewer pensioners than there are tax payers, so at some point the political calculus might swing. That's the problem with funding pensions out of current expenditure, reflecting generations of political cowardice.The state has the power to tax future workers to pay for these pensions
........reflecting generations of political cowardice.
Pensioners vote and they are entitled and greedy so they take it badly when it's pointed out that as a cohort they are rich and living off their children and grandchildren. They are the people who conflate wealth accumulated through property price inflation and pension fund inflation with the work they did during their working life, the "I worked hard all my live (did you, really?) and I earned what I have (no you didn't)" brigade.But it might not have the political will/ability to do so. There will always be fewer pensioners than there are tax payers, so at some point the political calculus might swing. That's the problem with funding pensions out of current expenditure, reflecting generations of political cowardice.
That will apply less and less to future generations of pensioners. Many will still be renting when they retire, defined benefit pensions will be gone and inflation in healthcare & old age care cost will accelerate. Ireland has failed to create a proper savings fund to pay for all this which will exacerbate conflicts over the intergenerational distribution of income.Pensioners vote and they are entitled and greedy
But while the old might have accumulated alot of assets and are technically rich they actually don't generate much wealth now. Wealth is created by workers, building houses, working in factories producing food and goods and essential services. Even in the workforce there are many people "working" now that have a job but are so far away from the production and wealth creating jobs.
A good dividing line between the productive and the non productive workers were the essential workers during covid who were required to keep working during covid, they might not have been highly paid but without those workers the country would have collapsed. A million euro in the bank is no good when the shops have no food or goods
This is almost the communist manifesto
Well Joe, I have generated plenty of wealth for the young, working QFAs who have sold me a succession of dud investments since I retired, as well as for the promoters of these products and the charlatans behind them.
And a further point is that this half a trillion liability doesn't have to be paid out all at once.To be fair to the public service, I must make two points.
(1) all public servants make substantially more pension contributions since the introduction of the PRD / ASC
(2) the SPSPS is less generous than previous schemes
Does anyone know by how much the annualised liability is increasing? That would be a more useful figure.And a further point is that this half a trillion liability doesn't have to be paid out all at once.
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