Pensions in crisis - It’s time for a national scheme

Once upon a time, you could get rid of an unwelcome visitor to your home by asking them to stay and join the family rosary.

Today’s version of that ruse is to talk about pensions — those vague, distressing, expensive, collapsing, and socially divisive essentials.

Maybe that is why Irish pensions, outside the public sector of course, are such a jumble of under-funded, more or less bankrupt — or if you’re lucky, just-hanging-on — constructs. Maybe that is why so many people neglect the inevitable need for a pension and don’t join a scheme. The level of uptake amongst low-paid workers and women stands below 50%. Even in these uncertain times, that seems reckless.

Yesterday, the Pensions Board published revised rules for defined benefit schemes and set deadlines by which trustees must submit funding proposals to the board to deal with deficits. Something around 80% of schemes are in deficit, some spectacularly so.

Indeed, standing at something around €1.2bn, the ESB’s deficit makes it all but impossible to privatise the utility. This could be a good thing for the country but it may prove an expensive veto — the State is responsible for these pensions so they will probably be paid one way or another.

The rules announced yesterday will only mean something if the company in question has a real prospect of rebuilding the relevant pension pot. Many will not, so their workers who had expected a pension worthy of the name will take little comfort in the revised rules.

Some companies have already put themselves outside of this loop by securing a Pension Board ruling allowing them to dramatically reduce their liabilities to workers. In some instances, workers have been told that, despite making payments based on salary over a number of decades, the pensions they had planned for — and funded — will not materialise. This dire situation is confined to the private sector, as public sector pension obligations are, very rightly, met in full. Nevertheless, this is another example of the fault line running through this society and it must be addressed.

It’s time to establish an national pension fund whereby everyone, public or private worker, gets the same return for every euro invested. The scheme should be backed by the State because, even in our world of collapse and change, without some considerable certainty in things like this, the idea of society is greatly diminished. In any event, that guarantee is already provided for state and semi-state employees.

Reacting in the Dáil three years ago this month, the then Labour finance spokesperson Joan Burton, when given an hour and a half to consider legislation that meant that 14 semi-state pension funds with pension liabilities of €3bn but assets of just €1.5bn would be bailed out by the taxpayer, expressed serious reservations about the process.

Imagine the reservations — and plain envy — felt by private sector workers in a similar situation but without recourse to a taxpayer bailout.

Apart at all from the social equity involved, this would create a fund that could be used for investment in the State and help create jobs and rejuvenate our economy.

What’s not to like?