Michael Clifford: Age-old issue of pensions hasn't gone away

There are five people working for every one who is aged over 65. By 2051, this ratio will be down to 2.5 to one, with the number of over-65s set to rise to 1.6m

Sinn Féin leader Mary Lou McDonald made a passionate plea for those who wish to receive a pension at 65, who had 'worked hard, paid their way, paid their bills'. Picture: Gareth Chaney

In the long run, we’re all dead. Hopefully, along the way, we can do a few things to ensure that the place is still ticking over after we depart the stage.

Sorry for starting on such a morbid note, but the long run raised its head this week in the form of pensions and populism. These two are not a good match. Pensions, as we know them, are one of those things that, in the absence of drastic change, will, in years to come, be regarded as fond relics of a bygone age. The demographics of the wealthy western world are such that it will soon be impossible for those working to support retirees in the manner to which we have become accustomed.

Right now, there are five people working for every one who is aged over 65. By 2051, this ratio will be down to 2.5 to one. According to the CSO, there are currently around 690,000 people over the age of 65. In 30 years, this cohort will rise to 1.6m.

These projections are positive in terms of longevity and prolonged quality of life. The problem arises with attempting to maintain a standard of living if fewer people are working to support more.

You can take it as read that, in 2051, nobody will be retiring at 65. Neither, in fairness to everybody, should that option be available. When the current retirement age was introduced in the early 1970s, life expectancy was around 72 years. People today can expect to live on average a decade longer.

All of this is against a background which, as reported in the  Irish Examiner this week, around a third of people working today have no private pension provision.

In 2014, the Government set off down the road to protect workers over the coming decades by increasing the retirement age to 66. There was due to be a further hike to 67 this year, but all changed utterly in last year’s general election.

Early on in the campaign, pension policy departed from sustainable planning and became a tool of populism. As with other populist causes, this one had its seeds in tone-deaf governance.

The problem of bridging the gap between the termination of an employment contract at 65 and entitlement to the State pension at 66 was dealt with by forcing those affected to sign on as if they were unemployed.

This was insulting to people who had reached the end of their working lives, subjecting them to an unnecessary indignity. Simply because the vast majority of the cohort in question was in all likelihood outside Fine Gael’s core base, the government adopted a “suck it up” stance.

There was no sectoral provision for areas such as manual labour. There was no legislation to allow anybody who wished to do so to work for the extra year. The changes only affected private sector employees, as those in the public sector received a supplementary pension.

Naturally, those affected used the opportunity of an election campaign to get the matter addressed. 

Some in the political arena saw that there was great hay to be made on the issue.

Both Sinn Féin and People Before Profit didn’t just want to stop any further hike in the pension age, but to reverse entitlement to the age of 65.

Bríd Smith of Solidarity-People Before Profit said there was “no empirical evidence” to show the working-age-to-retiree ratio would decrease as forecast. (Science, experts — who needs that oul' stuff when you can promise and emote angrily.)

Mary Lou McDonald famously noted that “the demographics will take care of themselves”. In a leaders' debate, she waffled a bit around this to the extent that moderator David McCullagh asked, “so you are encouraging people to procreate”, his left eyebrow shooting for the studio ceiling. More babies will be made, more workers will contribute, under a Sinn Féin government. Pensions ever after.

The issue was freighted with two elements on which populism thrives — the dismissal of science and the disregard for the long term.

It worked. Pensions were a big issue in the election and contributed to Sinn Féin's excellent result.

The real outcome is that the raising of the retirement age is no longer regarded as an element of sustainable planning, but has transmogrified into a hot political potato. As with the mess that was made with water charges — again by a Fine Gael-led government — so it is now that the pension issue is one which no party wants to touch.

Plans to raise the age to 67 have been long-fingered. Sinn Féin, most likely to lead the next government, retains a policy of lowering the age back to 65, even as the party voted in the North to raise the retirement age there from 65 to 66. North of the border, it would appear, the issue has not become too hot to handle.

This week in the Dáil, McDonald made a passionate plea for those who wish to receive a pension at 65, who had “worked hard, paid their way, paid their bills”.

“Many more have spent their working lives on their feet in very physical jobs in factories, on building sites, and in retail.” 

All of this is worthy of articulating, but when exactly does McDonald believe the pension age should begin rising? Or should it at all? Or does it matter because she will have left the political arena when the problem really hits home?

One thing is clear — the longer the current model is retained, the more it is going to cost the young workers of today and all workers tomorrow.

In the same contribution, the Sinn Féin leader mentioned “gold-plated” pensions for politicians and others. Most certainly, the whole area of gross inequality in pensions requires examination. But that alone will go nowhere near sorting a problem that is inevitably going to affect millions in the decades to come. 

As always, those most affected will be the very cohort least equipped to bear the burden, including workers relying solely on the State for a pension.

Short-termism has always been an occupational hazard for politicians. The focus is forever on the next election. 

But there was a time when the long run did feature in the thinking of governments. Even Charlie ‘When I have it I spend it’ McCreevy set up the national pension reserve fund two decades ago on the basis of projected major shortfalls in the public service pension. (That came a cropper with the 2008 collapse.)

These days, the future is beyond our galaxy, an alien place where the demographics take care of themselves. A lot of people will be paying a high price for this carry-on, but that’s all in the long run, a time beyond the reach of the current strain of populism.