Eddie Hobbs: We face retirement apartheid if we ignore the pensions problem

Ireland will experience a chronic problem with retirement poverty, and needs a proper study of the crisis as a precursor to engaging in debate on the issue, says Eddie Hobbs            
Eddie Hobbs: We face retirement apartheid if we ignore the pensions problem

VALERIE’S name was announced on her trendy apron. She took coffee orders one at a time, her movements slow, unrushed.

Unresponsive until she faced customers, she clearly had diminished hearing, but that was hardly surprising: Valerie looked about 70. It is a chronic error to project society forward further than 10 years and expect it to be the same as today. It won’t be.

Many of our parents and grandparents will have to take up menial jobs to supplement income. Valerie is in the vanguard of what is coming. Her shift ended with my last sip of coffee. She drove off in a jaded small car, first registered in the 1990s.

The Irish pensions model, which purports to offset old-age poverty and prevent retirement apartheid for the majority, is on its way to the scrapyard. It is dying from an acute set of afflictions against which it cannot stand.

It’s worst affliction is neglect born out of political cowardice, a deeply embedded trait in a system that punishes long-term planning in favour of populist, short-term thinking and which provides to the national parliament a steady stream of those who are best at promising the undeliverable to the gullible.

The rot at the centre, clientelism, which positions TDs as brokers, intermediating between State agencies and their clients, is routinely rewarded by many voters, who like the arrangement.

This explains why independent TD, Michael Lowry, tops the poll in his Tipperary north constituency, and why others at its apex consider dancing on a jeep outside the Dáil to be a popular expression of the system’s triumph.

The truth is that not one parliamentarian is prepared to champion a task that begins with accepting the need to radically overhaul their own pensions, and recognising them as a part of a trans-generational Ponzi scheme that deeply embeds inequality.

Neither is there a champion among the hard left, those who see every issue as a part of a mythical struggle by the proletariat against oppression and whose answer to every dilemma is to plunder higher-earners, which has the benefit of garnering votes by selling the pleasing message of victimhood, rather than accepting personal responsibility to pay taxes and levies.

The inconvenient truth is that both the old-age and public-sector pensions are unsustainable and, much like the health system and universities, the only way of dealing with the issue is to fund them and manage them properly, a difficult message to a public weaned on voting for those who best promise to fix their problems by getting the neighbours to pay.

Throughout the world, pension schemes that promise guaranteed income for 20 to 30 years are closing down, crushed by the madness that it is possible to sustain a ratio of working years to non-working years of two to one, while largely propped up by the paltry returns on long-term government bonds.

If the strongest corporations in the world, which rely heavily on government securities, are incapable of filling the yawning gap, how can the Irish ‘pay as you go’ model, which underpins public and old-age pensions, be expected to do so? No one asks, yet this is the moving statue in the pensions market.

The ‘pay as you go’ model, favoured by the insider officer class to defend the existing system, is, for an aging population, cover for a pernicious transfer of wealth from the private workforce and its future generations to a middle-aged, fully pensioned minority, led by them.

Every time I get a balance sheet from this sector, there’s inevitably a large blank for the value of accrued pension benefits. It’s seen as an entitlement and not an asset, yet in all cases it vastly outweighs the value of every other asset owned, including homes, even when valued at bubble prices.

A guaranteed, lifelong pension, payable from one’s mid-60s of just €25k escalating each year is worth €1m. Add up all these pension promises and they exceed twice Ireland’s elevated national debt, but receive little public attention, including from the State broadcaster.

Unless Ireland introduces a properly funded universal pension scheme and caps excessive pensions in some public-sector contracts, age 75, followed quickly by age 80, will become the new age 65 and the old-age pension will be rationed by the introduction of means-testing.

Meanwhile, Ireland will experience a chronic problem with retirement poverty, with most of its old-age population feeling bitterly excluded.

Ireland desperately needs a proper study of the crisis at our doorstep, as a precursor to engaging in rigorous public debate on the many choices and solutions to it.

Left undone, society will slip into retirement apartheid, an inevitable outcome of punishing long-term planning at the ballot box because it may personally cost us.

Sadly, we can be pretty sure that none of the above will feature as a priority on flip charts festooning political think-ins. Such a debate has all the appeal of a dose of Epsom salts with your coffee.

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