How to fix the Pension crisis?


#1
  • State Pension age increasing to 68 (current plan by 2028)
  • State Pension age increasing to 68 (current plan by 2028) + compulsory pension contribution
  • State Pension age increasing to 67 (current plan by 2021)
  • State Pension age increasing to 67 (current plan by 2021) + compulsory pension contribution
  • State Pension age remaining at 66
  • State Pension age remaining at 66 + compulsory pension contribution
  • State Pension age returning to 65
  • State Pension age returning to 65 + compulsory pension contribution
  • Other

0 voters

The State Pension scheme is a mess. Even at the height of 15+% unemployment in the last recession the cost of pensions was higher than Jobseekers payments, which is frightening. It has since grown further.

Govt solution was to increase retirement age for State Pension to 66, 67 (by 2021) and 68 (by 2028).

The 66 change went relatively unprotested, mainly I think as there was a transition payment given to those from 65 to 66. This is now gone.
We go to 67 next year and this became a big political issue during the Election. I actually think all the parties were caught a bit on the hop by how much of an issue it was. There are promises now to not let it go to 68, reviews, etc.

This can has been kicked down the road for years, if not decades. It is clear we cannot keep the status quo. People are living longer. As the solution of don’t pay it til 3 years later (65 to 68) now seems untenable by the electorate, the Govt needs a solution.

Simply saying we’ll keep it at 66 or 67 doesn’t solve the problem of what people live off for those 1 or 2 years.
CSO had a survey lately where 60% of workers had no private pension and of those 60%, 40% plan to live solely off the State Pension. That’s 24% of workers who wish to rely on the State Pension, which they now won’t get for 1-3 years after they retire and we know is unaffordable for the State long term!

Many countries now require mandatory contributions into a private pension, such as Singapore and Australia. We have looked into this option as part of past reviews and one hurdle was an employer contribution, which some businesses may not be able to afford.

IMO mandatory contributions has to be introduced asap. This is a long term game. Setting the bar low at say 4% personal contribution and 1% employer could get the ball rolling.
This, in turn, allows a Govt fudge of keep it at 66 short-medium term.

I’ve a poll created; vote away and interested to hear other solutions.


#2

Run the Government like a household budget. Sorry, sacred cows cut all over the shop.

Slash Public expenditure to year 2000 levels. True Austerity, a root and branch job, including an end to Quangos and NGO funding

Strip out various forms of Corporate Welfare masquerading as Public Expenditure. Look at the growth in the HSE budget over the last twenty years.

The rule is: we didn’t need this in 2000. We don’t require it today.

Probably get a bullet to the head for doing it mind.


#3

It doesn’t need to be quite as simple as retire at X years of age. Change it so that the amount one receives is based on the age at which one retires. For example:

Retirement age: Payout

  • 60: 50%
  • 65: 75%
  • 68: 100%
  • 70: 120%
  • 72: 140%

Adjust the numbers, to achieve the necessary cut to the total pension payout.


#4

There is a lot of fat that can be trimmed before we get to pensions, end the middle class welfare state. The foreign aid budget is a billion p/a, the NGO sector is nearly 6 billion, our contributions to the EU budget are 2 billion, but forecast to match that. Thats the guts of 15 billion p/a by 2030/40 saved, that would more than plug the projected 3 billion p/a hole in the pension reserve.


#5

The money paid to NGO’s is eye watering.

How many houses could you build for 5/6 Billion a year.

Game Over.


#6

If people were encouraged to save some of their income in the same way as they are encouraged to spend it all on consumerism, there probably wouldn’t be much of a problem at all.


#7

Currently most people get almost double their money in the form of tax exemptions when they save into a pension. Save a €100 a month, but it will only cost you €60. What more encouragement can there realistically be?


#8

Years ago I was employed by a major american multinational that shut manufacturing operations in Ireland, large numbers of people got substantial redundancy payouts and hundreds of them did not rest until it was all spent. The ability to defer gratification isn’t universal. Lots of people see their credit card limit as a spending target. Also the theft by the government from pension funds during the last crisis doesn’t inspire confidence. Add the chatter on here about a bond bubble and I think a plan B is needed.

Where do I put money that is protected from inflation, when it finally returns, and can’t be stolen by government? Bullion buried in the back garden?


#9

Governments over the years have created “consumers” instead of “savers” the encouragements need to be more publicly announced, too many adverts for “throw away crap” almost none for boosting savings.


#10

https://www.irishtimes.com/business/economy/raiding-pension-pots-the-latest-harebrained-solution-to-property-crisis-1.4274954?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Feconomy%2Fraiding-pension-pots-the-latest-harebrained-solution-to-property-crisis-1.4274954

“Take a tax free lump sum out of your pension to put to a deposit”

Insane idea that will do nothing but pump money from pensions into propping up the price of housing in addition to pensioners losing all the tax benefits.

Potential alternative

-Remove the arms length rule so your granny/parent can take an ownership in your property through her pension, literally becoming the “bank of mum and dad”. Funds stay within the pension, flows back to parents/grandparents who consume and draw down paying tax etc. All money stays in the Irish economy.


#11

The proportion of FTB’s with a pension scheme, let alone one that has €20k sitting in it will be small. But in principal it is a hair brained idea. And of course it will no doubt apply to ‘new’ homes only which is further subsidy to builders and landowners.


#12

also another layer of ‘professional fees’


#13

Costs. For example, the cost of a standard PRSA in Ireland is crazy. Most people are looking at about 5% contribution fee plus a yearly fee of about 2% of the money managed (1% to manage the underlying fund and 1% to the PRSA company for, well I don’t know what). Yes, there are cheaper ones available, but you need to know what you are looking for to find them. Company pension schemes tend to be even higher costs. Whereas Vanguard offer essentially free accounts. Rather than having someone like Vanguard provide investment accounts, in Ireland the accounts are managed by small organizations that charge high fees. Long term this makes a massive difference to pension returns. This needs to change.


#14

They allow this in Singapore. But they also require you to save into a private pension


#15

A large part of the is due to the fact PRSA’s are a revenue creation, they are awful outside of the facts you mentioned. They dont follow regular pension rules when it comes to early retirement, discriminate against those who dont own a company/company wont contribute.

Realistically, everyone should have pension freedom to invest in a SIPP/EPP with zero investment restriction, revenue/govt involvement.


#16

The Australia model works well - employer mandated pension contributions. It’s not an option - it’s compulsory from a CEO down to a toilet cleaner.

It also creates a competitive pension industry where consumers are savvy to the fees charged and there is competition between the pension (super) funds.


#17

So as of now the State Pension age changes to 67 in January.

The Government had said, before they formed the coalition, that this would be delayed to allow for a review.

Still no sign of a decision to delay or not…


#18

Well, look on the bright side, that’s one less pension to fund. :slight_smile:

(probably in bad taste, but I just couldn’t resist. :wink: )


#19

That’s an interesting idea, but there’s a good chance that it will open up the pension gap even more than it exists at present, which might not be a good thing either economically or socially.
Generally, people who might work into their 70s are ones who have jobs that (a) they enjoy, (b) they start after an extensive period of education and training, mostly in their late 20s and © they are capable of doing well as they age. On the whole, these jobs tend to be well paid and their holders see them more as vocations than just jobs or even careers. Not many building labourers are capable of laying bricks or carrying hods of cement for 55 years and not many call centre workers want to recite mindless scripts to irate callers for what seems like forever. Furthermore, those jobs often don’t pay well, so unless the state pension is reasonably generous, someone who has such a job might need to work to 75, even if they saved frantically throughout their working lives, to get the same pension as a proportion of income that a moderately frugal engineer or lawyer who paid into a private pension could draw at 55, even before the state pension kicked in.

Maybe if you were to change the terms to time spent in employment, rather than time spent working, it might work better? (e.g. retire after 40 years, get 45% pension, after 42 years, get 60%, after 44 years, 70%…)


#20

I also think there’s something to be said for giving tax relief on private pension contributions at an intermediate flat rate, rather than the marginal rate of income tax. If, for example, all contributions were relieved at 35%, it would be a real incentive for lower rate taxpayers to save, as they would be getting a lot of free money as a proportion of their contributions. This probably wouldn’t cost the exchequer all that much, if it cost them anything, as the very lowest paid still wouldn’t be able to save much at all, if anything and as for the higher paid, they would, admittedly lose out, but 35% relief is still relief, and on the whole, they tend to be in the kind of jobs that attract significant employer’s contributions, so they still get free money anyway.

(I write this a a very frugal higher rate taxpayer, so I can deal with most things short of outright confiscation. :smile: -D )

Maybe the government should also demand that all providers offer a basic low fee pension/PRSA option, such as a basic tracker fund, before they are allowed to enter the market? (I think this is the case with the basic stakeholder pension that Gordon Brown introduced in the UK)