Ireland is among countries where private sector workers face huge falls in pensions income. In the period 2001-10 in the 34 mainly OECD developed countries, real (inflation adjusted) pension fund performance was a paltry 0.1% yearly on average. Where public pensions are relatively low and private pensions voluntary, such as Germany, Ireland, Korea, Japan and the United States, large segments of the population can expect major falls in income upon retirement.
Meanwhile, Irish politicians who have one of
the world's best pension schemes, linked to earnings, are presiding over the
accelerated death of defined benefit (where there is a guaranteed payout related
to earnings) schemes for the minority of private sector workers who have an
The Irish Pensions Board says that 80% of Irish
defined benefit schemes are in deficit and it has set new minimum funding
standard (MFS) rules which require pension schemes to have enough assets in
place to secure pensioner liabilities and other accrued benefits if the scheme
were to be wound up.
In 2010, Irish pension funds still held average equity allocations of 50% compared with Netherlands pension funds, which held an average equity allocation of 26% and in Switzerland 30%.
In the UK, average allocations to domestic and non domestic equities fell by 4% (from 47% to 43%) in 2011. In Ireland the current average allocation to equities is 44%, down 6% from last year and down over 20% since 2008 (Finfacts Premium).
Irish pension fund returns May 2012
Meanwhile, the Irish Government has a 40-year
plan to reform public pensions that are unfunded but the annual cash cost is
heading for €3bn. Read more
This week, John McManus, business editor of The Irish Times
wrote on plans to hoover up private pension funds that will increase the
risks for funds that will struggle to produce returns in teh coming decade.
The following was my comment:
Ireland is among countries where private sector workers face huge falls in
pensions income. In the period 2001-10 in the 34 mainly OECD developed
countries, real (inflation adjusted) pension fund performance was a paltry 0.1%
yearly. Meanwhile, Irish politicians who have one of the world's best pension
schemes, linked to earnings, are presiding over the accelerated death of defined
benefit (where there is a guaranteed payout related to earnings) schemes for the
minority of private sector workers who have an occupational pension.
It has been official policy to keep employer social security low but the
politicians have feathered their own pensions nest well and those of public
In 2010, Irish pension funds still held average equity allocations of 50%
compared with Netherlands pension funds, which held an average equity allocation
of 26% and in Switzerland 30%.
Almost 2 weeks after HSBC Bank revealed huge losses on subprime mortgages in the
US, Irish bank shares hit an all-time record on Feb 21, 2007. How many well-paid
fund managers bet with others savings that the
The Irish free lunch fairytale was
going to continue?
Responsibility for semi-State and university pensions was assumed directly under
the Financial Measures (Misc. Provisions) Bill which was rushed through the Dáil
in just three days in 2009. The National Pensions Reserve Fund is now
responsible for these funds and the deficit in the funds exceeded €1bn according
to a 2010 response to a Dáil question by the then Minister for Finance, Brian
The university deficits amounted to about €630m led by Trinity College at €315m.
While the majority of Irish private sector workers have no occupational pensions
and those who do face the prospect of meagre payouts, it has been an exception
in universities for both academic and non-academic staff to retire without
additional pensions years allocated.
This is an expensive perk and of course coming from the public treasury, there
wasn't much to worry about.
In a report, the Comptroller & Auditor General said additional years had become
a feature of pension awards in universities. By way of example, in UCD 78% of
staff retiring between October 2007 and September 2008 had years added to their
service for pension purposes.
Similar provisions apply in other universities - - Trinity College stated that
since 1972, on the basis of custom and practice the award of added years has
become a legitimate de facto entitlement under its Master Pension Scheme and
that Scheme members were advised that they had been granted added years.
How can a civil servant in a bankrupt state retire at the age of 57 with a lump
sum payment of €428,011, a special top-up of €142,670 (for senior civil servants
who retire early) and an annual pension of €142,670?
Brian Cowen, former taoiseach, retired at 51 and his ministerial and TD's
pensions gives him about €150,000 per year. Cowen also received a tax-free
pension lump sum of around €150,000 (three times the value of his TD's pension)
and a termination lump sum of around €16,000.
The net cash cost of public pensions (after an employee's normal deductions) was
€876m in 2001; €1.4bn in 2006; €2.0bn in 2009 and €2.3bn in 2011 and will rise
to €2.7bn in 2015.
I was recently informed that the Irish unit of Atlas Copco, a Swedish
multinational, was winding up its existing pension scheme and cutting benefits.
I worked in AC for 12 years. The group is in fine shape but it suits under Irish
law to claim poverty and screw potential pensioners like me.
So private sector workers who are lucky to have pensions, take a hit while the
shortfall in university pensions is borne by the taxpayer and of course that has
coincided with academics calling for the burning of bondholders and maybe
consequently also some private sector pensions.