A deepening crisis
The OECD in its report on the Irish pension system is highly critical of the failure by successive governments to take some “fundamental decisions” on private and public pensions in recent years. Since 1996, pensions have been under review by various bodies, including two commissions and now, frequently, by the OECD. But little fundamental reform has been achieved, and Irish pensions – public and private – face a deepening crisis. Analysis by experts has, it seems, paralysed the political decision-takers, and the public is now paying a high price for their inaction.
The Social Insurance Fund – which is financed through pay-related social insurance contributions and is used to pay State pension and welfare benefits – is in deficit, €1.5 billion in 2011. And the shortfall will soar in the years ahead. Eight out of 10 defined-benefit – final salary – pension schemes are now insolvent, and the Pensions Board may wind some up if, after next June, they cannot meet the minimum funding standard set. Meanwhile, the National Pension Reserve fund, which was intended to finance future pensions, has been wound down, with most (€21.7 billion) of the proceeds of the fund used to invest in, and save, the country’s two main banks.
Today the European Court of Justice (ECJ) is expected to decide an important case, with implications for the Irish pensions industry and the State. With the collapse of Waterford Crystal in 2009, many former employees lost most of their pensions when the company’s pension scheme was wound up. Under existing law, as pensioners take priority over others – members and deferred members – in the distribution of the assets of the pension fund, the latter group found themselves with little income in retirement.
The OECD recommends the law should be changed. And the European Court may find that Ireland is in breach of European law by not having put in place an insolvency guarantee fund to protect the retirement income of these former Waterford Crystal workers.