Why is there no concern about the state's unfunded pension liabilities?

This will be a much different issue than the banking crisis. It will be like global warming....it's not worth the effort of any single person today to try and fix this as it's going to happen anyway. The effects will only be felt over time, bit by bit, like death by a thousand cuts, and when the brown stuff hits the fan, it will be too late.

Therefore, I would be in favour of the following:

1. Forcing workers to put a % of their pay into a pension. I'd leave it to the boffins to calculate this percentage. I would also like to see that it would be possible to use any pension fund regulated in the EU rather than the small, cosy cartel of pension providers here

2. Put a line in the constitution that private pensions cannot be levied by the government - this would give people the confidence to save for a pension

3. Limit Old Age Pension increases to something like 90% of the cost of living increase, over a long number of years (i.e. inflate away the problem) and only when the economy is in a surplus

4. Switch all public sector pensions to defined contribution immediately (by all means honouring defined benefits accrued up to now) - this would draw a line under this massive liability, where it could be financed by separate bond funding down the road. There would also be a better chance for PS workers of getting their pensions too!

Any other suggestions?

Firefly.

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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Orka, you & I are in the same boat and we are both rowing in the same direction! As much as I'd like to increase my pension provision here, I just see it being taken from me when I need it most. Granted the tax benefits are good putting funds into a pension, but I think I am going to take my chances with my own investments

Hi Duke!

I understand your argument for the government to concentrate their efforts on acheiving maximum growth in the economy over the longterm as the best way of meeting future obligations. In a perfect world I would agree, however, all you have to look at is what happened during the CT to understand what happened when there was funds in the coffers! It goes out faster than it comes in. All the vested interests lined up with their pockets opened. Remember those trips to NY by the great & good in FAS? In additon, external forces such as international recessions can scupper the best efforts by any individual government. Given that our economy has never really been constant, but either in a state of incline or decline, leaving the provision of pensions entirely on the status of the economy at any particular time would be dangerous in my opinion. Best to take a small bit out of the economy over a long period of time.

Firefly.

Next Witness: Gerry Adams Tanaiste

Chairman: Mr. Adams, you are 85 years of age and have been in charge of your party for quite some time now

Adams: A cairde, mise ni ocras ar...

C: Inquiry adjourns for 20 mins to source an interpreter

20 mins later....

C: Don't you think your decision to exit the euro with the subsequent 10 fold devaluation of the punt contributed to this crisis?

Adams: Not at all. It was that ridiculous white elephant of a tunnel which the blue shirts built to their beloved brits.

C: Tomorrow you are entitled to your Old Age Pension. Will the 30% reduction affect you personally.

Adams: Ah naw, sure that much went to the party anyway.

Just to add (I really should have bunched all my posts together), I think that:

(1) the OAP will be means tested in years ahead, and I wouldn't be surprised if the home was taken into account in this calculation either
(2) if you have income from other sources, such as another pension, your OAP might be reduced

I think the association people have with the OAP currently is that it is a right. Going forward, perhaps, it may be seen as a help to the less well-off, like the dole is now.

Firefly

Firefly said:

I would also like to see that it would be possible to use any pension fund regulated in the EU rather than the small, cosy cartel of pension providers here.

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Irish pension funds need to be better regulated to start with and why not mandate the minimum acceptable returns as we do here in Switzerland. Here a pension fund is required to provide investors with a minimum return as defined by the government from time to time before fees can be drawn and failure to reach the required return means that the management company must top up the fund to meet the required rate of return. And even with these rules we have no shortage of pension funds on offer.

Jim2007 said:

Irish pension funds need to be better regulated to start with and why not mandate the minimum acceptable returns as we do here in Switzerland. Here a pension fund is required to provide investors with a minimum return as defined by the government from time to time before fees can be drawn and failure to reach the required return means that the management company must top up the fund to meet the required rate of return. And even with these rules we have no shortage of pension funds on offer.

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Wow! That is incredible. What sort of minimum returns are required these days?

Jim2007 said:

Irish pension funds need to be better regulated to start with and why not mandate the minimum acceptable returns as we do here in Switzerland. Here a pension fund is required to provide investors with a minimum return as defined by the government from time to time before fees can be drawn and failure to reach the required return means that the management company must top up the fund to meet the required rate of return. And even with these rules we have no shortage of pension funds on offer.

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Hi Jim,

Would this not just promote more risky investments in order to try to meet the required returns?

Firefly.

Firefly said:

Would this not just promote more risky investments in order to try to meet the required returns?

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No because the asset classes, allocations and even the instruments are also regulated, discressionary investing is limited to around 5% of the fund. Most funds are also required to report on a quarterly basis (The Swiss rarely loose their own money )

Hi Jim

Maybe we should open a new thread because we are moving quite far from Brendan's original question?

Can you elaborate on these investments please? I'm a believer in the no free lunch dictum so I'd like to understand what one is sacrificing in return for guarantees. In general, investment is a trade off between risk and reward - so if guarantees are provided to both capital and growth, there must be significant consequences somewhere. Perhaps there are multiple funds available so, for simplicity, can you use the example of an individual with a long term investment horizon please? The type of info that would be helpful would include:
- what is the typical asset allocation between the different asset classes?
- what is the geographical spread of these investments?
- what is the minimum benchmark return?
- over what period are the benchmarks calculated?
- what are the typical charges if the required return is achieved?

Protocol said:

The transition pension at age 65 has been abolished.

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Protocol,
What is the transition pension you are talking about?