Pensions crisis will mean later retirement
Published 21/02/2012 | 05:00
THOUSANDS of workers face the prospect of delaying their retirement because their pension funds have been decimated by the downturn.
The pensions timebomb means that private sector workers now could be forced to continue working into their late 60s and 70s.
The crisis in retirement plans comes as it emerged that the Government has called in international thinktank, the Organisation of Economic Co-operation Development (OECD), to review pensions policy in the State.
Only half of workers have a pension, but those who do have seen their funds eaten away by poor stock market returns and a raid by the State on retirement fund assets.
And thousands have either stopped making contributions or cut them to the bare minimum.
The situation for private sector workers is in stark contrast to the public sector.
More than 7,000 public servants are set to retire at the end of this month, with average lump sums of €80,000. The average annual pension will be €27,000, with many of those leaving taking early retirement.
Pensions expert Tony Gilhawley commented: "Everyone expects those who work in the public sector will have to work longer. People in the private sector have not got the money to put into their pensions."
Mr Gilhawley, of consultants Technical Guidance, said workers had been hit by a whole range of factors:
• New rules mean that anyone born after 1961 will have to wait until they are 68 before they get the state pension.
• Seven out of 10 defined benefit company pension schemes are in deficit, which means that they will not be able to meet the retirement income promises workers had been expecting.
• Irish pension funds have been among the worst performing in the world.
• The eurozone crisis has made it more expensive to buy a pension income, known as an annuity.
• The State's levy on pension funds is set to suck close to €500m a year out of private pension funds over a four-year period.
• Anyone who bought a property expecting it to fund their retirement has had to radically alter their plans.
The average size of a private pension fund at retirement is just €100,000. This would provide an annual income of as little as €3,500 a year, according to Jerry Moriarty of the Irish Association of Pensions Funds.
The OECD probe into pensions policy is likely to focus on the fact that a majority of company defined benefit schemes are heavily in deficit.
It is also likely to review government plans to change the rules by 2014 so that anyone who does not have a pension is automatically enrolled into one.
And the OECD review is likely to hone in on the annual €3bn cost of paying public sector pensions, which are funded out of Exchequer income.