Paying for pensions
Sir, – The Irish Times (October 30th) devotes its top story – and the whole of page 8 – to working out and showing what Ministers’ pensions would cost if they had to be funded in the same way as private sector pensions. No doubt this will provoke plenty of hostile, shock/horror reactions; and another flurry of attacks on the very idea of trying to provide decent pensions for workers who retire, whether from public or private sector employment.
But why is no-one making the obvious point that the high cost of funding public service pensions in the same way as private sector pensions is precisely the reason why the former are not funded in the same way as the latter? Public sector pensions can be financed on the less costly “pay-as-you-go” basis because the continuity of the employer (ie the State) is virtually guaranteed. Unfortunately, the same cannot be said for most private sector employers, so PAYG schemes run by them have long been seen as inappropriate. Hence the development of occupational and personal pension schemes, funded by employers, employees and self-employed people, as appropriate; governed by special pensions and trust law, regulated by the State and protected, at least to some extent, from the fortunes or otherwise of the particular organisation.
In the late 1990s, the Commission on Public Service Pensions carried out extensive research and analysis, with actuarial valuations and projected costings, of pensions for public servants; and around the same time the National Pensions Policy Initiative (and later, the National Pensions Review) did similar work in relation to State pensions, as well as occupational and private pensions. These bodies made numerous recommendations for reform and improvement of our national pensions systems. Few of these have been implemented – with the notable exception of the National Pension Reserve Fund, now sadly depleted with scarcely a comment on the consequences for State pensions in the future.
Today’s commentators would be better employed calculating the long-term economic and social costs of cutting State pensions and failing to properly fund private sector pensions (which seems to be where all this is leading), than engaging in meaningless calculations about the cost of funding State pensions through reliance on the vagaries of bond and equity markets. Working out how to protect private sector pensions from these vagaries, and how to ensure the continuity of good public service pensions, would be a more fruitful exercise. Unless they are seriously suggesting that the idea of seeking to provide a retirement income of at least half of one’s pre-retirement income is “breathtakingly over-generous” and utterly outrageous, in these days of austerity . . . – Yours, etc,