Inaction on pensions cannot continue

There are very few areas where the report-to-inaction ratio is as disappointing as in pension reform. 

One earnest report after another has urged action on inadequate investment and the genteel poverty facing many of us in old age. Each report has warned of the consequences of changing demographics.

Today there are 5.7 workers for every retired person but by 2040, that ratio falls to two workers for every retired person.

That means today’s arrangements, hardly overly generous, will be unsustainable. This calculation is based on studying population but does not consider the prediction that up to 15% of jobs could be lost to automation in a similar period.

That prospect is behind the Economic and Social Research Institute’s suggestion that the statutory retirement age be moved from 66 to 70.

This might make sense on a spreadsheet but in the real world, it seems a crushing prospect — especially as it would have a very different impact on different sectors of society.

Inaction on reform is a characteristic of our pension culture but so too is an institutionalised inequity.

The retirement of Garda commissioner Noírín O’Sullivan provides a perfect example of how public and private sector workers face different circumstances. Ms O’Sullivan, like any public servant earning €180,000 a year, got a golden handshake of €300,000 and will get a pension of €90,000.

A worker in the private sector would need a pension pot of over €5m to generate that return. Building that pot would require €125,000 a year over an unbroken 40-year career. That is impossible for 99.9% of private-sector employees.

It has been suggested that Ms O’Sullivan’s successor may be paid considerably more. If precedent is followed, her pension will be increased to reflect the next commissioner’s salary.

That unfunded principle applies across the public sector but is unheard of in the private sector. Labour’s Brendan Howlin has warned that such an increase would ripple all across the public sector.

In the private sector, one pension scheme after another has closed and workers told pensions will be a fraction of what was anticipated.

Such a fleecing is, thankfully, unimaginable in the public sector but it does highlight the fact that Irish pensions exist in parallel universes.

That around 60% of private sector workers have not got a pension deepens that divide. This neglect is understandable, if unwise, as the closure of so many schemes must discourage anyone considering a pension investment.

Taoiseach Leo Varadkar has promised that a five-year reform of the system will be unveiled shortly.

This is indeed welcome but experience suggests that welcome be put on ice until real change is delivered. This newspaper has, for many years, argued for a full cabinet minister dedicated to pension management and reform.

Time, unshakeable stasis and continuing inequity strengthen that argument each and every lost year.

It is time too to consider the role of senior officials in this well-flagged crisis.

They, after all, may have more than most to lose if we actually had a fair, reliable and equitable pension system that served the hopes of all citizens equally.