PENSION planning may have been the root-canal work of managing your affairs – you do it when you have to but not a moment before. It combines cost, confusion and long-term speculation in the most opaque and unattractive way, yet deferring your involvement creates even more problems.
But, as the tens of thousands of workers trapped in grossly under-funded private schemes have come to realise, we need to pay far more attention to how retirement packages are managed and funded. We probably need to completely reappraise how we provide for a dignified old age.
Two statements issued yesterday reminded us this issue is unavoidable, fraught with complexity and, for a spiralling number of private sector workers, that expectations built up over long careers may not be realised.
Insurance and pensions giant AVIVA warned we need to save an extra €9,100 year – €175 a week – or expect “a seriously reduced standard of living on retirement”. They warn Ireland’s pensions savings gap – the difference between ambition and reality – stands at about €20 billion a year. Despite our fluency in billions this remains a tremendous sum. The majority of employers or employees can’t bridge this gap in any meaningful way.
The Professional Insurance Brokers’ Association (PIBA) joined the debate by warning in the strongest terms that proposals contained in a National Pensions Framework (NPF) document will deepen social inequity and “impoverish middle classes”.
PIBA say they have not been thought through properly and will, if applied to the public service, amount to a second pension levy.
Diarmuid Kelly, PIBA chief executive, warned the proposed reduction in income tax relief for pension funding from 49% to 33% will kill off interest in savings and impoverish many of those who worked in the private sector.
“If implemented, it will be a socially divisive policy further widening the inequitable gap between the quantity and quality of private and public sector pension coverage,” he argued.
This divide is seen at its sharpest when pensions are considered. One set of workers must hope markets smile kindly on their investments so they can turn on the heating in their old age while the other remains immune to the fluctuations of the day.
No one wants this inequity to continue and it is well past time for a realistic set of practical proposals from Government to confront this terrible situation which we have all been warned about time and time again.
Despite all of our difficulties it is time for a minister whose sole responsibility would be a universal pension scheme for all workers, private or public. This person should be charged with a clear objective – the creation of a scheme where each member pays the same proportion of their wages in the expectation of a pension that represents a fixed percentage of their salary.
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