Pensions crisis - We need a minister for pensions

The decision by the ESB unions to vote for industrial action puts the spotlight on Ireland’s pensions time bomb; an economic, political, and social catastrophe waiting to happen.

The prospect of power cuts in the run-up to Christmas is horrifyingly real. What is equally horrifying is the underlying reason why more than 87% of the ESB group of unions took this decision.

Their concern relates to a €1.6bn deficit in the company pension scheme, something that staff have complained about for more than two years. The deficit means ESB staff approaching retirement are likely to have their pensions drastically reduced.

They are not alone. Aer Lingus employees are in a similar predicament. Last year the airline told the Irish Stock Exchange that if the €748m deficit in its pension scheme is not addressed, members yet to retire could receive as little as 4% of the pensions they expected.

That deficit has grown to €780m and a week ago Aer Lingus management walked out of a meeting on the issue with union representatives after heated exchanges.

Hundreds of thousands of people nationwide also face reduced pensions. The deficits in defined benefit schemes are truly staggering.

The OECD recently estimated that the shortfall in Ireland’s social welfare pensions budget will amount to €324bn by 2066.

Defined benefit schemes in the private sector have deficits in excess of €15bn so even those who were “guaranteed” full pensions will not get them. The Pensions Board has already issued strong warnings that workers will have to radically readjust their expectations when it comes to retirement as a result of losses that pension funds have sustained.

Yet, unbelievably, little or nothing is being done at government level to address this crisis.

It is not as if successive administrations haven’t been warned. In 2008, the Comptroller and Auditor General estimated the scale of pension liabilities in respect of public sector pensions to be at €108bn. That amount has grown since then.

Earlier this year, the European Court of Justice found in favour of Waterford Crystal workers who took a case against the State for the loss of their pensions when the company went bankrupt. This follows a similar case taken by a woman in the UK in 2007 where the British government agreed to restore her pension to 90% of its value.

The pensions crisis is the single biggest financial issue facing Irish families, yet, instead of tackling the crisis, the Government appears to be making it worse. Budget 2014 reduced the standard fund threshold from €2.3m to €2m. While a fund of €2m may seem very generous, it in fact equates to an annual income in retirement of about €50,000, affecting a substantial number of people.

Now that we have emerged from the bailout, the pensions crisis must assume priority for the Coalition before it becomes completely unmanageable. The only sure way to tackle this is via the creation of a dedicated minister for pensions. Only someone with a seat at the Cabinet table will have the clout to insist that the situation be addressed as a matter of extreme urgency.

More on this topic

Government pension plan to ‘exclude’ 700,000Government pension plan to ‘exclude’ 700,000

Plan an echo of housing betrayal - Pensions too important to trust marketPlan an echo of housing betrayal - Pensions too important to trust market

Joan Burton warns new pension scheme should not be privatised Joan Burton warns new pension scheme should not be privatised

Get smart about your pension paymentsGet smart about your pension payments


Lifestyle

‘Children of the Troubles’ recounts the largely untold story of the lost boys and girls of Northern Ireland, and those who died south of the border, in Britain and as far afield as West Germany, writes Dan Buckley.Loss of lives that had barely begun

With Christmas Day six weeks away tomorrow, preparations are under way in earnest, writes Gráinne McGuinness.Making Cents: Bargains available on Black Friday but buyer beware!

From farming practices in Europe to forest clearances in the Amazon, Liz Bonnin’s new show seeks solutions to some of the damage done by the world’s appetite for meat, writes Gemma Dunn.New show seeks solutions to some of the damage done by the world’s appetite for meat

Louis Mulcahy reads in Cork this weekend for the Winter Warmer fest, writes Colette Sheridan.Wheel turns from pottery to poetry

More From The Irish Examiner