Madam, - In this "National Pensions Week" the financial services sector is losing no opportunity to remind us that we are failing to make adequate provision for our retirements. The remedy prescribed is predictable: more subsidies in the form of even bigger tax-breaks for its pension products.
Yet one of the main reasons why many people refuse to invest in private pensions is that they just don't trust the financial services sector and consider its products rotten value.
Think about it. Having recently been stung by high-cost, commission-driven endowment mortgages, we are now being asked to gamble our retirements on what appear to be remarkably similar products.
And what are we paying all these commissions and management fees for, anyway? Factoring out the underlying market trends (in respect of which the individual investment teams have little or no influence), investment in securities is a zero-sum game. For every winner there is a commensurate loser. In short, the entire sum of pension funds does no better than the market - even before the industry extracts its very generous fees and commissions. Moreover, experience shows that is almost impossible for the hapless punters to predict winning or losing investment teams on the basis of past performance.
To make matters worse, this farrago is subsidized by the long-suffering taxpayer, and it would be difficult to deny that the large fees extracted by the industry, even when it loses our money, are sustainable only in the context of the tax-subsidy enjoyed by pension products. In other words, the taxpayer is subsidising the industry with little gain for the prospective pensioners.
In the light of recent (and not so recent) scandals, public trust in the financial services sector is now probably beyond redemption. Decades of policy mis-selling, overcharging scandals, and a perceived attitude that it's only wrong actually to get caught with your hands in the punters' pockets, means that the Government will have to look beyond the financial services sector if we are to see any significant future increase in funded pension provision.
Surely it is not beyond the wit of Government to set up a broad-based fund managed by a computer programme within the auspices of the NTMA in which every taxpayer would have an individual account or stake commensurate to his or her contribution. To encourage self-provision, contributions could be tax-subsidised at the standard rate, and the State would have to guarantee a minimum inflation-proof or index-linked return on these accounts. The only fee would be a 1 per cent administration charge on all investments into the fund. The general administration of the pension accounts (but not the money) could even be tendered out to the private sector. I believe such a scheme would produce bigger and more secure pensions for the public at less public cost than existing private pensions.. - Yours, etc,
PETER MURRAY, Currabinny, Carrigaline, Co Cork.