Cantillon: Paying a heavy price for paralysis on pensions policy

An illustration of the ineptitude of government and its inertia when it comes to the issue of pensions came with the news yesterday that Independent News & Media has secured approval from the regulator to slash the benefits built up by its workers over as much as 40 years.

The Pensions Board gave approval for a pension rescue plan that will see workers surrender 39 per cent of the pension that they expected to receive under their employment contract. Think about that. Four out of every €10 euro that people expected to receive in retirement will not now be available to them.

This, remember, is a listed company which has every expectation of continuing in business far into the future, delivering profits to shareholder s – not some failed enterprise where workers are being required to take their pain alongside other stakeholders.

While it is true that the restructuring of INM will see others take a financial hit – the company’s bank lenders and shareholders who will be diluted in an imminent €40 million rights issue – they can recover those losses into the future. The pension promise in their contracts of employments meant staff generally made little alternative provision: for many it is now too late.

Part of the reason the company’s pension scheme found itself in this position is that over recent years, the regulator – whose role, ironically, is to protect members of such schemes – has effectively raised the bar on many pension schemes, making them unsustainable in practice if not in theory.

Others share the blame. Successive governments have substituted activity for action. The current administration has shown itself as adept as its predecessors in this regard. The Department of Social Protection is awash with reports on reform of the Irish pensions system. What they share is (i) a call for is fundamental reform and (ii) a plea not to longer-finger decisions in a sector where putting off the inevitable incurs considerable cost. The present Minister, like her predecessors, has chosen the path of political expediency.

The pensions industry must shoulder its share of the blame. For the money it charges, it has delivered little in the way of the required performance and has been slower than many international peers in adjusting to new realities.