Saturday 1 October 2016

Pensions debate must allow for facts of life - that the poor die younger

Published 12/04/2015 | 02:30

You'd need the constitution of an ox to be an unhealthy person in Ireland. WB Yeats was half right: this is no country for old men. But it isn't exactly paradise for unfit/overweight men and women either. Harassed, hectored and hit in the pocket at every turn, the unwell are the hard-pressed group it's okay to discriminate against.

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In much of the western world, a diagnosis of illness is a distress signal, heralding a period of rest and recuperation. Here, it's often the opening shot in a bureaucratic battle with the HSE. The healthcare provided by our health system is usually top notch but securing access to that healthcare can be a sickener in itself.

Even before arrival at the hospital door, Ireland is a cold house for those who are not in fine fettle. When an individual's ill health is attributable to poor lifestyle, officialdom's disdain mutates into something akin to vengefulness. Smokers, boozers, overeaters and other wilful desecrators of their bodily temple frequently speak of feeling like refugees in their own land; despised, harried, endangered.

Last week, however, there was a rare glimmer of good news for the out-of-sorts. Irish Life, the largest pension provider in the state, announced details of a new product specifically targeted at people with unhealthy lifestyles or a history of illness. The snappily-titled Enhanced Annuity purports to offer "better value" for the unwell, a financial shot in the arm for those who are all too familiar with the medicinal variety.

Depending on the severity of a client's medical problems - say Irish Life - the product could deliver an income "enhancement" of up to 25pc more than a corresponding healthy person would receive. There is, of course, a catch: the annual payout is larger because the period over which it will be made is shorter. This is a pension devised for customers who are not expected to become long-term customers.

Irish Life bosses aren't in business for the good of their own health. This is a hard-nosed commercial proposition. Other firms offer similar pensions, and so-called 'enhanced' benefit is a fast-growing market. In the UK, 54pc of retirees live on payments derived from such schemes. "One of our key objectives is to increase the number of Irish customers benefiting from this," declared an Irish Life spokesperson. Predictably, Irish Life has been criticised for the chirpy, upbeat tone with which it launched what we might call its pension-for-the-poorly. There is, undoubtedly, a macabre side to such contracts. Enhanced benefit pensions essentially involve the company taking a punt that the client will die sooner. When this happens, the money saved on subsequent payouts can be used to subsidise other customers - or taken as profit.

In truth, however, this is the 'principle' on which the pensions industry has always operated. It's high time we stopped being so squeamish about this. What we actually need is a great deal more plain-speaking about how we propose to finance our declining years.

Politically, there is intense pressure on state pensions. Our overlords in the European Commission have explicitly stated their determination that retirement ages across the 28-nation bloc should rise "significantly". The advancement of their goal in this country was accelerated in 2010 when changes to our state pension regime were a condition of the EU-IMF bailout. In January of last year, the age of pension eligibility increased to 66. It will rise to 67 in 2021 and to 68 in 2028, and will continue rising.

The reason for this drive towards a reordering of the pension system is financial. Pensions sustainability is under threat everywhere. But cover for what is a fiscal consideration is being provided by the bogus assertion that increasing life-expectancy has decreased the need for state pensions. We live longer so we should work longer. QED. Like much of what is presented as conventional wisdom, however, this seemingly rational assertion is rife with mistaken assumptions. When policy is based on national averages, it can disguise some startling inequalities. Not everybody is living longer. While overall health is improving, the wellbeing of some sectors is deteriorating. Inevitably, the variations relate to social class. Put simply, poorer people die younger. They also work physically harder and in more adverse conditions.

Public discourse about pensions is conducted almost exclusively by economists, academics, politicians, journalists. These worthies are virtually unanimous in the view that working well into your 70s is something to be welcomed. What this paper-thin consensus reveals is that work means different things for different demographics.

For a fortunate minority, work is personally satisfying and economically rewarding. For many, however, it's a painful drudge. Individuals who work in academia, the media or politics may well be able to work late into life. But manual workers with creaking backs and aching limbs will not.

People from all backgrounds need to prepare for retirement in ways that suit them and their circumstances. Private pensions are becoming more important than ever and we need greater clarity and more information. We also need to be more upfront about the realities of old age and ill health. Everyone wants to live out their final days amid blue skies and sunshine. But we shouldn't allow this fervent hope to blind us to the fact that most final days are lived out under the weather.

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