Wipeout for middle class as pensions hit yet again
Cowen’s retirement deal valued at €6m while markets take nosedive
Published 21/08/2011 | 12:14
PRIVATE sector pensions in middle class Ireland have suffered a second wipeout in three years, following last week's turmoil on the world markets, with some funds falling by a staggering 20 per cent.
The news comes as former Taoiseach Brian Cowen's pension has been valued by a financial analyst at €6m, giving him an annual retirement salary of €164,526, all paid for by the taxpayer.
According to several pensions experts speaking this weekend, the widespread volatility on the world markets is set to continue into next month as fears of a global recession mount, with further losses on funds expected. Private sector pensioners have this summer been hit by a double whammy of the Government's 0.6 per cent levy and a spectacular 20 per cent drop in the value of their funds, the experts said. People who were badly hit in 2008 by and large saw a good recovery of losses up until March of this year. However, since then funds are down considerably and the fear is there is worse to come once the markets come back in earnest in September, experts said last night. The catastrophic decrease in funds is the latest blow in the everdeepening pensions crisis in Ireland. According to confidential documents presented to Finance Minister Michael Noonan, about 75 to 80 per cent of defined-benefit schemes are now technically insolvent, with the total deficit estimated to be about €15bn.
Trinity College Dublin economist Constantin Gurdgiev said the “huge destruction” in the equities market and the hit to private pensions shows clearly that funds are not being managed properly. He also said that the imposition of the government's pension levy has given funds an incentive to be more risky.
“These falls should have the alarm bells ringing in the regulator's office. We need to have a serious examination as to how pensions are managed in Ireland,” he said. Such has been the dropof European shares, US technology giant Apple is worth as much as the 32 biggest eurozone banks combined. Apple is currently valued at around $340bn (€236bn) on the stock market. But the latest crash in private pensions is in stark contrast to the extensively generous retirement benefits afforded to state employees and elected representatives.
Departing politicians, including cabinet ministers who were in office during the crash, who retired or lost their seat at the last general election, shared a pot of more than €14m in taxpayers' money. Des McGarry, managing director of Invesco, writing in today's Sunday Independent, has valued former Taoiseach Brian Cowen's pension pot at more than €6m. He said the cost of providing such lavish pensions had soared by 57 per cent to €2.2bn a year since 2006.
Speaking about Mr Cowen's pension arrangement, he said: “It is ludicrous that at the age of 51, a person can qualify for such a Statefunded pension, when those who are self- employed or in privately-funded schemes must wait until they are 60 or 65 before accessing their own savings.” Mr McGarry said the Government needed to level the playing field between public and private sector workers to “ensure the financial stability of the State”.
However, pensions expert Peter Brown, of the Irish Institute of Financial Trading, said people should not panic about the losses, saying that the losses will recover over time.