How to best deal with our pensions crisis: stop talking about it

THE advice given to those trying to deal with the pensions crisis in Ireland is stop talking about it.

The advice by Tara Flynn, a human resources consultant said the answer to the pensions crisis could be to avoid the use of the word in sales and marketing literature.

Speaking at the Irish Association of Pensions Funds (IAPF) annual investment conference in Dublin, she said pensions have become associated with complexity and the fear of loss. To boost take-up one leading British high street retailer had significant success when it deliberately avoided the pensions word, she said. “The industry needs to educate, not pontificate. Show not tell. It needs to avoid scaring people off with actuarial and investment jargon.”

As defined benefit schemes decline workers do not realise they have to look after their own retirement needs, because employers are off the hook at this stage.

“People need to empower themselves. Many are not saving enough and not increasing contributions over time,” she said. “The big challenge for the industry is to communicate the benefits in a personal way in plain English and educate employees how to invest for their individual needs.”

Paul Droop, senior investment consultant, Watson Wyatt, said too much credit was given to investment league tables. He said success rates over less than 10 years were “largely irrelevant.” Even those with a good track record over ten to 20 years plus need to be analysed to ensure the successful investment strategies were still in place, he said.

William Killeen, associate director, Equity Management at Bank of Ireland Asset Management said active management was “unfairly maligned in the current environment of ballooning pension fund deficits.” Not only can successful active management be a contributor to lower fund risk, but “crucially, in the longer term, active management produces superior returns”.

Michael Moloney, European Director of Investment Strategy at Mercer Investment Consulting told the conference low interest rates and improved longevity posed serious new challenges.

Minimising further downside risk while trying to keep costs within manageable levels have become the norm. Those responsible for funds feel like they are “running desperately up the sand dune of the minimum funding standard” he said.