Government pandering to pension industry
We will be borrowing this from the pensions industry if they choose to buy our Irish sovereign bonds. How crazy is this?
We are investing pension contributions from private sector workers matched by similar amounts of tax foregone, €4.1 billion in 2007. There is no guarantee that we will get a single cent return from the industry. In effect we give our money to the pensions industry free gratis and they in turn lend it back to us under guilt edge conditions with a state guaranteed penal interest rate.
The minister’s claim, in his Oireachtas speech on December 15, that “this solves the problem we have in regard to under-funding of pension schemes” is disingenuous. When we were in the middle of the greatest economic boom this country ever experienced our Government extended the funding period for under-funded pension schemes at the request of the industry. This was an ideal time to encourage over-funding of pension schemes. If we could not solve the pensions under-funding problem in good times the chances of doing it now must be rather remote. The state’s funding is being seriously damaged by the pension industry investing pension funds overseas. It is within the Government’s remit to correct this by withdrawing tax deferral status on pension contributions. Then make a Government-guaranteed pension product available on the same lines as saving certificates. The contributions into this product will be at the Government’s disposal without going through a third party and incurring the associate costs.
In a recent press article the industry showed very little appreciation for the proposed change even though the minister stated “I hope the industry, which suggested this measure, will purchase the bonds”. Should our government be still pandering to the pension industry when they have let so many pensioners down?
Michael Terry
Castleknock
Dublin 15
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