Pensions time bomb - Appoint a pensions minister

Let’s hope the Government takes more notice of yesterday’s OECD report on pensions than its predecessor did of the 1980 EU Insolvency Directive, introduced to protect employees’ pension rights in the event of their employer becoming insolvent.

That issue will play out again this week when the European Court of Justice will hand down a ruling in a case brought by former Waterford Crystal workers. They are suing the State because they were left without a pension when their employer collapsed. The Waterford workers’ British colleagues in Wedgwood got pensions because a British government had, on foot of the EU directive, introduced legislation and established a pension protection fund.

This case goes far, far beyond former Crystal workers and is relevant all workers in defined benefit pension schemes that may have a deficit — by far the great majority in the private sector.

Public service pension costs rose from €1.6bn in 2008 to €2.5bn last year. This reflects an almost two-thirds rise in pensioner numbers as more public servants have reached retirement age and others retired early. The shortfall in the social insurance fund — used to pay state pensions and welfare — reached €1.5bn in 2011 and estimates indicate it could hit €324bn by 2066. This figure seems to make the €300m at the centre of the Croke Park II rejection seem very small change indeed. This is not the limit of the State’s pension liabilities either as about half of those working in the private sector do not have a pension.

One of the recommendations in yesterday’s report is that the Government should strengthen laws to protect defined benefit pensions for members — basically that it should catch up with a 30-year-old EU directive. It also says that “healthy plan sponsors should not be allowed to walk away from defined benefit plans unless assets cover 90% of pension liabilities”. This will be very welcome by workers in profitable companies that might wish to avoid defined benefit scheme obligations.

One of the recommendations will, however, worry pensioners as a rebalancing of the rights of pension scheme members, be they retired or not, is suggested.

So many of the issues that make the idea of social equity so remote, so very flimsy in our society come together on the pensions’ issue — private sector workers exposed because gaps were not closed; public sector workers enjoying, in all but name, guaranteed defined benefit payment schemes without funding them properly; tax breaks that benefit the rich at the expense of others; unsustainable levies on struggling private funds; still others unable to fund any pension left to the mercy of time and fleeting possibilities; obscene packages for the mandarin and political elite; and probably most of all, a deep unease growing amongst the generations who played by the rules and did what was required of them but now find that those sacrifices will stand for little enough or nothing when they stop working.

The OECD report will not be the last on the subject but is as good a place as any to start. The Government should grasp the nettle, appoint a minister to deal exclusively with the crisis, hand them the report, and tell them to get on with it. It may be too late for tens of thousands of workers, but surely the mess we’ve left for our children is big enough without leaving them a pensions nightmare as well?