Irish Pensions Magazine Spring 2014
26
Review
to colleagues.
And Bob Dylan must have been a bit of an actuary back
in 1964 to predict that the times they are a changin.
Defined benefit pensions in Ireland are a dying breed
everywhere now except in some significant employers
and in the public sector. Inflation is not a problem.
Funding is. Living longer is. Retirement provision
is. Defined contribution is the order of the day with
members not fully understanding the risks inherited
and awash with investment options and fund choices
with the opportunity to make fund switches online, by
phone or through an app.
Members can also check their pension values
online, print benefit statements daily, have access
to projections using varying assumptions and can
stay up all night looking at the many retirement and
investment scenarios that could or may arise, if that is
what is required. We now have daily unit pricing and
investment options presented to members in a variety
of ways to reflect the underlying strategy or risk profile.
There are investment options that do it for members,
help them do it or leave them to it. People are living,
and will live, significantly longer and, as a result, need to
spend more time thinking of the future and need more
money for life in retirement.
Pension scheme members now have greater flexibility
on retirement with cash, pension purchase and ARF
options and have to contend with matters such as the
impact of death and divorce, before or in retirement, on
these options.
Employers, members and pension scheme trustees
have been in Court or are heading to Court. There has
been, is and will be talk of industrial unrest and action
in Ireland over pension provision. The trust that existed
between employers, employees and pension scheme
trustees seems to have broken down.
The Pensions Levy has arrived and could be with us for
ever. Talk of reduced tax relief comes and goes with
each Budget. The State retirement age has changed
without the bat of an eye.
Defined contribution pension schemes – the solution
for our future retirement provision – are not full of
the people who should be members and are full of
former members, who may not be aware of, or even
care about, their retirement savings. Contribution rates
are, generally, calculated on basic salary, inadequate to
provide for what is needed and rarely, if ever, reviewed.
Life seemed pretty simple in 1980. Everything seemed
to work. There was no need to worry. Not now. Life is
much more complicated and nowhere more so than in
the areas of pension provision.
Aging and death are life’s changing agents. We need
fresh young blood to invigorate employers and the
country to allow for continued growth and development.
Inadequate provision for later in life will act as a log
jam to employers and the country if people currently
working cannot afford to retire. Older generations
without adequate financial provision will stifle those
coming behind.
In 1980, the question was why should one invest any
time in trying to understand? There was not an awful lot
to understand. Now there is a lot more to understand
and yet people do not invest the time to try and
understand.
Government, employers, pension scheme trustees
and members need to work closer together and make
the effort now, and consistently in moving forward,
to ensure that the pensions time bomb that is being
widely predicted will not explode under everyone.
It is vital for all involved to stop now and ask why, how
and what needs to be done to allow everyone plan
and provide adequately for life post retirement. Good
pensions do not come cheap. And there are no special
discount aisles in the supermarkets for pensioners.
The key question is why do we want everyone to have
adequate post retirement savings?
Is an answer to allow employers to continue to continue
to grow, develop and prosper through replacing older
generations with younger blood, energy, fresh ideas
and a growing future customer base?
Is an answer to allow people, post retirement, to spend
their savings on products and services supplied by
the employers that we wish to see grow, develop and
prosper?
Is an answer to allow those in retirement to continue
to financially contribute their share to tax revenues,
independently fund their post retirement living and
healthcare requirements and not move to a country
where it is cheaper to live, or become another burden
on the State?
Adequate post retirement financial provision is good
for everyone - good for employees, good for employers
and good for governments.
And why is what we are facing called a pensions time
bomb? Should we not look upon it as a people time
bomb? Everyone knows it is there, exists and will affect
people.
We all know that people are living longer with different
needs and without adequate financial provision. It is a
people problem that we are facing. It will affect all of us.
Our families, colleagues and employees.
Unwavering commitment from employees, employers
and governments, adequate contribution levels
supported by good communication, knowledge and
understanding will help build a foundation for the
future.
Government levies and unrealistic thresholds will
not help create a solution. Realistic employee and
employer contribution levels linked to base salary,
overtime, bonuses and employer profitability, and the
continuation of tax benefits will. Opportunities to allow
employees effectively transfer gains from stock options
and share purchase plans to approved pension savings
need to be introduced.
Everyone involved must believe that the current post
retirement landscape in Ireland can be changed. The
