Pension inequities - Reform urgently needed

ALL TOO often paying into a pension scheme is a blind act of faith, like throwing pennies into a deep, dark wishing well.

We hope the process will have the desired affect and that when the time comes to finally leave the workplace, with our colleagues’ best wishes ringing in our ears, that our dreams will have come true.

We will earnestly hope that the pension investments we’ve made will pay off more or less in the way that we anticipated. We will hope that our gamble — and make no mistake, a gamble it is — will have paid off.

Alas, that may no longer be the case. A combination of misfortune, misselling and mismanagement has prompted tens of thousands of workers to look on pension arrangements as an unrewarding game of lucky dip.

Faith, central to a secure pension system, has been eroded. Yesterday’s report from the Irish Association of Pension Funds (IAPF) will add to the confusion and concern surrounding the issue.

The IAPF tell us that a number of private firms offering only a defined benefit scheme has fallen from 67% in 2002, to 37% today.

This is a startling change in such a short period and one that must give any private sector employee, employer or self-employed person more than the odd sleepless hour — tossing and turning wondering if they can expect some sort of half decent income in old age without having to sell the family home.

There is also a change of emphasis in where the responsibility lies. Individuals must assume a much greater degree of responsibility for financial planning.

“The responsibility and risk of securing an adequate income in retirement is increasingly moving to employees but... many are not fully aware of the extent of this major change... or of its implications for them personally,” commented Patrick Burke, chairman, IAPF.

Loosely translated that means that the private-sector lifeboat is full and that you’re on your own. You need to ensure that you have made provision for an income that will sustain the lifestyle you have become used to.

It is a tacit acknowledgment that people depending on a defined contribution scheme will have to make additional arrangements to bolster retirement income.

Of course public sector employees can ignore all of this, wrapped in the State’s security blanket, secure in the knowledge they will enjoy a bomb-proof, inflation-proof pension, whether they make meaningful contributions towards it or not. After all, if they don’t, private-sector workers will pick up the tab.

Public sector employees are unlikely to be confronted over their pension arrangements by politicians of any hue. It cannot be because of the principle involved, which is patently unjust, so it must be another avoidance of convenience.

It would be entirely predictable that these arguments will be dismissed as begrudgery by public sector union chiefs — the only place they still exist — but the reality is that this is just another example of where the public service has become a sort of parallel universe, a Shangri-la where normal constraints no longer apply. How long would the feeblest private company tolerate the sickness levels reported in the prison service or some of the other lunacies revealed in the Comptroller and Auditor General’s report last week?

As late as yesterday there was an illuminating example of the fraught interface between public sector ideals and private sector realities when recently privatised Aer Lingus imposed a pay freeze, saying the time had come to end talks on a €20 million cost-cutting plan.

This Government has repeatedly shown that it has neither the stomach nor the will to impose real public-sector reform. However, it is not too much to ask but possibly too much to hope that the Taoiseach — who must soon review his own pension situation lest he need another dig-out — initiate a process that might restore equity, clarity and confidence to our pensions process.