WORKERS WHOSE pension funds have been severely hit by the current slump in equity markets may be allowed defer taking a retirement annuity for two years under plans proposed by Minister for Social and Family Affairs Mary Hanafin.
But they will have to rely in that time on income from the State pension unless they continue to work or have savings on which they can draw.
Ms Hanafin told The Irish Times that the Department of Finance was "sympathetic to deferring it [a pension annuity] for two years". But those who chose that path "would be taking a risk, obviously".
Asked what would be the source of income for pensioners who deferred the annuity for two years, she replied: "Most of these people would have a State pension [€230.30 a week], and the State pension is a good guarantee to fall back on."
The Minister's comments came as new figures showed managed pension funds suffered a further 4 per cent fall in October. As a result, the average Irish pension is now worth over 32 per cent less than it was at the start of the year.
Ms Hanafin was speaking after the leak at the weekend of a departmental memo pointing to a hole of between €20 billion and €30 billion in defined-benefit pension schemes and noting that more than 90 per cent of these funds were expected to be in the red at the end of this year.
The Minister pointed to a number of measures the Government was taking in an effort to alleviate the crisis. These include giving occupational pension funds 18 months to present a plan on how to restore their defined-benefit schemes to fully-funded status. The Pension Board noted this was a six-month extension on the current period for such a plan.
Speaking on RTÉ yesterday, the Minister said: "We are working closely with the industry . . . It came upon us very quickly and we might come out of it over the next couple of months . . . No matter what happens their private pension, there is always the State pension to fall back on . . . it's not as if somebody will be left with nothing."
Ms Hanafin also said that no pension fund had yet shut down.
However, survey data being presented this morning at a seminar by pension consultants Watson Wyatt indicates that employers are beginning to consider more drastic reform of pension schemes. Asked whether they would review pension arrangements for staff over the next 12 months, 20 per cent said yes and a further 56 per cent were undecided.
Of those planning a review, a significant majority, 73 per cent, said they envisaged changes that would impact not just on new staff but on workers who are already members of the scheme.
"People have been talking about taking action; now they're doing it and doing it aggressively," said Ray McKenna, partner and managing consultant at Watson Wyatt. "Employers are making the choice between their business and their [employees'] pension fund."