News Analysis

Tuesday 23 September 2014

It's essential that we get pension reforms right

Published 31/12/2012 | 05:00

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GOVERNMENTS can influence long-term events much more readily than day-to-day problems. But they usually try to do the reverse.

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Joan Burton's efforts to reform the pension system are important because they have real potential to ensure that millions of Irish people retire with dignity. Ms Burton is unlikely to do anything more important in her career even if she ever became Taoiseach.

It is therefore vitally important that the proposed reforms are well designed. This will require time and thought, but Ms Burton should not waste too much time or she risks being steam-rolled by the powerful pensions lobby.

An auto-enrolment system was promised for 2014 by the previous government, but we have heard little about it since thanks to this lobby, which continues to offer us complex products and opaque charging structures that generate massive profits for brokers and miserly returns for the rest of us.

Even Nigel Lawson, Margaret Thatcher's rambunctious Chancellor of the Exchequer, records wistfully in his autobiography that he was unable to withstand the pension lobby's wealth and influence. Expect to see endless dubious reports and opinion polls in the months ahead warning about Government control of pensions.

Those warnings will not be without merit. The coalition's raid on private sector pensions was a chilling reminder of how governments will do anything to feather-bed the public sector. It would be wise for the public to insist on a change to the Constitution to protect the new pension pot, but that is an easy safe guard. It would also be wise, but probably impossible, to insist that public sector pensions, including those belonging to TDs, be financed from the same pot as everybody else.

It is easy to forget how badly provided Irish people are. Just 772,000 are members of a pension scheme, while another 200,000 self-employed people have a pension scheme. Many of these schemes were always inadequate and many more have been destroyed by the bust.

Ms Burton is certainly right to say that most of us do not have adequate provision. She is also right to assume that most of us won't make adequate provision unless the Government makes it easy, and she is right to create a system that tries to help lower and middle-class workers, unlike the present system, which is aimed at the rich.

While Ireland is broke, we still have one huge advantage over other countries: time. With a young population and relatively few old people, we can still get this right.

As we head into 2013, the news that the Government is grasping the pensions nettle is an encouraging sign that we are finally looking beyond the banking crisis and beginning to think about the future once again.

Irish Independent

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