Pensions evangelist preaches flexible retirement

Anne Maher, head of the Pensions Board, says 65 needn't mean the end, writes Laura Slattery

The chief executive of the Pensions Board does not believe in "total retirement".

With two-and-half years left to run on her contract, Anne Maher, who has been at the helm of the independent statutory body since 1996, hopes to remain active in the world of pensions - a world where ensuring that as many people as possible enjoy a comfortable, financially secure retirement is the ultimate task.

"I think it's important for people to remain involved if they have an interest," says Ms Maher (59), who has been employed in the pensions industry for most of her working life.

"Although I appreciate that there is a difference if you have an interesting job rather than a job where all you want to do is get home in the evening," she adds.

A weekend farmer, Ms Maher owns a tillage and cattle farm in Ballymacarbry, Co Waterford with her husband, Paddy, a consulting actuary.

In her full-time job, Ms Maher, as head of the body responsible for regulating pension schemes and advising the Government on future policy, is aware that pensions have yet to shake off their image as the preoccupation of crusty, far-too-sensible individuals.

People under a certain age are often reluctant to pay too much heed to the details of how they will fund their retirement, as if simply by talking about pensions they will trigger a premature outbreak of grey hairs.

Despite recent publicity surges and apocalyptic warnings of pensions time-bombs, "many people's eyes glaze over when pensions are mentioned", Ms Maher admits.

Taking office at around the same time as the National Pensions Policy Initiative (NPPI) kicked off, Ms Maher is playing a major role in helping to boost the concept of pensions as a deferred and vital element of pay.

"I think it's a slow process, but we have got to start and work at it. The demographics are going to force it," she says.

These demographics include not only a falling birth rate and thus a steadily ageing population, but a dramatic increase in life expectancy for people aged 65.

A man aged 65 can now expect to live for another 15.4 years, while female life expectancy at 65 is 18.7 years. For males, this is an 11 per cent increase over just six years ago.

The bad/good news is that life expectancy in the Republic has yet to catch up with the average in the EU, where several governments are attempting to push retirement age up by a birthday or five. "There's no plan here at the moment to raise retirement age," says Ms Maher.

"What we will look at is how to facilitate flexible retirement, so people will have the option of getting part of their income from their pension and part of it from their part-time job.

"We want to allow people to work beyond 65 if that's what they want to do."

But what nobody wants is a situation where people are forced to keep working out of financial necessity. The Pensions Board's mission, with the aid of a Government-funded awareness campaign, is to increase the number of people with private pensions, plus make sure that those people who are contributing are putting in enough.

Some 300,000 people need to take out a pension in order for the Government to achieve its target of increasing coverage from 50 per cent (a benchmark taken from a CSO survey two years ago) to 70 per cent of the workforce.

If the gap has not closed significantly by 2006, the board may recommend compulsory pensions - a move that would prove highly unpopular among employers' groups.

A new CSO survey is due out at the end of August and Ms Maher hopes it will show some increase, pushing the coverage rate up to as much as 55 per cent. This might reflect the 27,000 Personal Retirement Savings Accounts (PRSAs) that have been sold.

The board's 2003 annual report, published this week, also revealed a 2 per cent increase in the number of members of occupational schemes. In 2004, there has already been an additional 5 per cent increase.

This adds a further 54,000 employees to the pensions net.

However, it is clear that the numbers are still some way off the 70 per cent target.

Legislation obliging employers to give staff access to pensions was supposed to boost PRSA sales, but compliance has been poor. By the end of 2004, the Pensions Board expects to take its first prosecutions for failure to give employees access to pensions.

It is determined to get tough on employers who flout pensions law, and its work has been encouraged by growing legions of whistleblowers.

"Probably the biggest downer to private pension provision is if people lose their money or if there's a pensions scandal," says Ms Maher, citing the long process of confidence rebuilding in the UK following various pensions scandals. "Security is important," she stresses.

On this note, Ms Maher is robust in her defence of the Pensions Board's onerous minimum funding standard for defined-benefit (DB) schemes, currently under review.

Some 43 per cent of the schemes examined this year have failed to meet the standard, and 100 schemes have applied for extensions in the time during which they must restore their schemes to full funding.

These employers have had to either increase their contribution rates or reduce benefits.

Some, it is threatened, may abandon the model in favour of the inferior but increasingly common defined-contribution (DC) kind.

"We think the standard works reasonably well, on the basis that if it hadn't thrown up some problems in the climate of investment that we had in the bear markets over three years, then there would have been something wrong with the standard," she says. "It is there to protect members."

But the gradual drift from DB to DC schemes remains a concern. Average contributions to DC schemes remain stubbornly at 10 per cent, when they should be closer to 20 per cent for an adequate pension, says Ms Maher.

She hopes an online pensions calculator to be launched next week will shock "happily ignorant" scheme members into putting more into their pensions.

Meanwhile, there is other work to be done. This work includes preparing the Republic for the advent of cross-border pensions and examining tax initiatives that could make pensions more attractive to the lower paid.

Ms Maher is grateful that, in her experience, "everybody is pulling together" on pensions, and that the issue is not used as a political football.

Pensions may not yet be rivalling property for a place in the regular staple of dinner party conversation topics, but if the Pensions Board's chief executive has her way, it will only be a matter of time.