Thousands face abject poverty

WITH Ireland’s pension time bomb ticking loudly, there is urgent need for Government to introduce mandatory cover for tens of thousands of people who are staring at abject poverty in their twilight years.

Highlighted by the annual report of the National Pensions Board, the warning that half the workforce will lack pension cover in old age, has taken some of the shine off the Central Bank’s up-beat analysis of the economy which continues to outpace other European states.

Despite the bank’s positive outlook, the country is in the unenviable position, according to the OECD, of having the worst state pension in the Western world, amounting to barely 32% of the average industrial wage.

That represents an ominous scenario for workers and is a damning indictment of successive governments. Thanks to foot-dragging by politicians, who themselves enjoy handsome pensions, hundreds of thousands of retirees are doomed to eke out their last years in penury.

Out of a workforce of some two million, an estimated 900,000 do not have a private or occupational pension to boost their incomes in retirement.

So dire is the looming crisis that Social Affairs Minister Seamus Brennan is considering the introduction of compulsory pensions after he receives a report from the Pension Board next month on the feasibility of setting up such a mandatory scheme.

Otherwise, a lot of people in the future are going to get a rude awakening when they reach the age 65. This problem is particularly serious for women, as only one third of those working outside the public service have pensions, many of which are far from adequate.

Exacerbating the crisis, tens of thousands of employers, mainly small firms, have made no effort at all to arrange cover for their workers.

That is reprehensible since the Personal Retirement Saving Account costs nothing as far as companies are concerned as they do not have to pay into this scheme. Any company that fails to alert employees about the existence of this emergency pension plan should face prosecution and heavy penalties.

Another aspect of the pension quagmire now causing anxiety involves 250,000 people on defined benefit schemes generally operated by large firms. Around 40% of these were hit when the stock market crashed in the wake of the September 11 terrorist attack on the US and still remain under-funded today.

For thousands of people with hopes of early retirement, the future looks anything but rosy if they are depending on a defined contribution plan. Outside the public sector, nearly half the country’s workers are in such schemes but saw the value of their funds evaporate when equity markets plummeted.

On the broad economic front, however, the picture could hardly be brighter. The economy is performing strongly, with inflation and growth prospects looking positive.

But the Central Bank’s up-beat prediction is tempered by the sharp rise in oil prices and the recent upsurge in personal borrowing in Ireland which is high by international standards.

Against this backdrop, Bank Governor John Hurley warns that “any significant increase in interest rates or downturn in economic activity in the future would cause problems, particularly for recent and more highly indebted borrowers”.

An even bigger problem, however, is posed by the sheer size of Ireland’s ageing population and the lack of adequate provision for retirement.

Mr Brennan must grasp the nettle and introduce mandatory pensions. Unless Government is prepared to face up to this crisis in a realistic way the demographic time bomb will explode with grave implications for Irish society.