Government’s moment of clarity over pensions
As a result it lifted the November deadline placed on firms to submit detailed refinancing pension plans.
Delegates attending the Irish Association of Pension Funds (IAPF) pension seminar in Dublin on Wednesday were also informed by Éamon O Cuív, Minister for Social Protection, that the Government had agreed to expedite the proposal to move to a “new” defined benefit pension model as outlined in the National Pensions Framework.
The framework recognised the difficulties with the current design and had proposed an alternative approach, and the minister, to the surprise of many at the conference, said his department is planing to launch the new scheme following changes in the law on 1 July 2011.
It was that decision that led to the November 30 deadline for phased submission of recovery plans to be extended further to the great relief of the bulk of the DB sector whose funds are in deficit.
It remains to be seen whether this deadline will be met, and sources have also suggested the Pensions Board may be forced to stay its hand until the new DB plan has been put together to allow all existing pension plans respond to the terms laid out under the forthcoming DB system.
Given the minister sees the need for change it makes common sense to hold off on the restructuring until the new guidelines have been agreed.
Philip Smith of Arthur Cox solicitors, a specialist in pension law, expressed doubt that the new DB plan could be put in place in such a short space of time given the very complex nature of pension plans and the long-term implications of whatever new system is deemed to be the way forward.
Nonetheless this development is a welcome move, and it remains to be seen if the minister’s department will be able to come up with the broad outline with the deadline he has specified.
This is a time of huge uncertainty and it is the responsibility of the Government to come up with a plan that will be realistic and can meet people’s retirement aspirations.
When you look beyond our shores at the French objecting to being asked to work until age 62, we can console ourselves that for all the flaws in our present system the level of awareness about the issues we face are at least being articulated better than elsewhere.
Mercer’s Bob Moreen, who is charged with coming up with the pension plans of the future, pointed out that taking the current retirement age of 65 those who will live to 100 are look forward to a retirement of up to 30 years on average.
It was clear from Wednesday’s conference that while Ireland has short-term issues on pensions that need urgent action that down the line the shifting demographics pose huge challenges.
It did not come up on the day, but the elephant in the conference room was public sector pensions.
How does the ordinary taxpayer continue to fund that growing burden at a time when the numbers at work are down dramatically and the age profile is rising?
Some time back insurance group Aviva concluded the average Irish person needs to be saving over €9,000 more per annum or face a seriously reduced standard of living in retirement. That survey was based on people with pensions in this country hoping to retire on 70% of their basic salary.
Aviva concluded that a €20bn annual gap exists in what Irish people ought to be saving.
The pension situation is an area that will have to get far greater attention if the increasing numbers hitting retirement age are to have any sense of security.
