Richard Curran: 'The 'good' news is we'll be working well past 66 - if we're lucky'
I've got some good news and bad news. The good news is we are living a lot longer. The bad news is that we will have to work a lot longer too. Some who are older might argue this isn't such a bad thing. And in fact if employers were more open to taking on older workers for their experience, qualifications and judgement the economy would benefit.
The downside is that even if you do not want to be flipping burgers or cold-calling potential customers well into your late sixties, you may have to in the future.
Amlan Roy is global chief retirement strategist with State Street Global Advisors. He was in Dublin during the week and he told me that pension promises made to workers in many countries are unsustainable. He said one thing that needs to happen is that countries should look to get rid of mandatory retirement age and their economies need to get older people out there working in flexible ways.
Roy is a specialist in numbers, trends, demographics and how they impact on the world around us. He said the conventional wisdom about demographics is wrong because it misses the point. Statisticians see over 65s as some kind of homogenous group when in fact lots of other factors have to be taken into account.
In Ireland's case he believes we have some very solid advantages when it comes to the road ahead. Relative to other countries we have not overpromised as much on pensions as some places. The percentage of the Irish population over 80 years of age is just 2.3pc compared to a global figure of 3.6pc.
He said nobody can solve the pension problems of the world and we have to create a system where older people are accepted and integrated fully into the workforce. He dismisses the idea that if you employ lots more older people it means there are fewer jobs for younger people.
Roy believes that kind of displacement is not a serious issue especially if older people are working part-time and in flexible ways.
Our effective retirement age is 66.9 for men and 63.5 for women. In France it is 60 while in South Korea it is 72.
He said nobody can answer the question - how much will I need to live when I retire? There are too many factors to take into account such as how long you will live, what the inflation rate will be, where and how you will live, what the performance of assets will be etc.
As different countries, especially in the EU, try to grapple with the cost of having an older population, it raises questions about how much investment for the future is going to younger people. Perhaps it partially explains some of the shift towards populism and a growing dissatisfaction with political establishments in places like Italy and France.
Of all the social spending by EU countries, 39pc of it goes on old age, 28.4pc of it goes on sickness and health measures, 8.5pc on family and children and just 4.5pc on unemployment. The seeds of frustration and anger among the younger generation are there in the figures. The numbers explain why Europe is nearly broke according to Roy.
When it comes to Ireland he believes we have some things in our favour. We have potential to leapfrog ahead of other countries when it comes to female workforce participation and gender pay gaps. As a composite total figure males are paid 60pc more than females in Ireland. In the UK the figure is 90pc more.
Ireland also scores very well on quality of life issues which are becoming more attractive for mobile international workforces in an age where a greater percentage of populations are working in enormous megacities.
Roy also points to Ireland's high score on things like human development. We rank 8th in the world on this score behind places like Norway (1st) and Germany (4th). But we are ahead of highly developed economies like the US, the UK, Japan and France.
Because of low interest rates and low bond yields, pension funds are moving away from the old equities, bonds and cash investment model. Increasingly they are putting money into the category called 'other'. This includes things like real estate, infrastructure, commodities.
A long-term analysis of pension fund investment shows that in 2001 the Dutch had just 1pc of assets in the 'other' category. By 2017 it was 17pc. The US went from 5pc to 28pc in the same period and Switzerland went from 9pc to 28pc.
Roy has the ultimate global perspective on anything to do with demographics and long-term investing. Ireland doesn't do badly in his analysis but we will all have to find a way to fund our longer lives.
The 'not a clue' model of health spending has cost us dear
Our health system is truly broken. GPs were protesting outside the Dail last week while nurses had another day of action seeking higher pay. This is despite the fact that 50pc of the increases in public spending by the Exchequer since 2015 have gone on health.
Nobody has a clue whether this is or isn't enough money. Or maybe it is enough money but it isn't being spent wisely. Nothing reflects the not having a clue situation so bizarrely as the overrun at the National Children's Hospital.
We will get a wonderful hospital when it is all over but we won't have a clue how much we could have or should have spent building it. The row over who knew what and when in the €2bn fiasco is playing out politically. And so it should. Accountability is very important.
But far too much attention is going on who knew what and when and not enough is going on how.
How did this happen? The make-up of the board looked spot on. Several private sector heavy hitters with lots of experience, combined with civil servants who could be the eyes and ears of the ministers and taxpayers. The chairman Tom Costello resigned.
Some might argue the whole board should go but even if they did, it would leave the project's new board starting from scratch. Was there corporate governance in the structures or were civil servants really the ones driving the project and ultimately doing it badly?
We shall have to wait and see what the PWC report concludes. Either way it doesn't augur well for future State infrastructure investment.
Finance minister Paschal Donohoe has said he will bring forward proposals to ensure this kind of overrun doesn't happen again with future State projects.
If it were that simple then he is probably about €1bn too late on this project alone. Imagine what we could build in health for €1bn - well, for €500m or €600m and allow for an overrun.
Fancy a punt on Boris & Co?
Markets rarely make sense. If they were totally logical it might be easier to make money from investing. Sterling has strengthened since Theresa May's 230-vote defeat for her Brexit deal, despite a firmer belief that a no-deal exit is very likely. Sterling dipped for a time last week as investors digested the implications of Donald Tusk's "special place in hell" remark.
The idea being that it would entrench views in the UK. And it reflected a deep reluctance in Brussels to bail out the Prime Minister. Yet, Irish stocks had a good week. Somehow, the realisation that many blue-chip Irish companies are performing very well lifted their share prices. Last Tuesday, Kingspan, Smurfit Kappa, CRH, Glanbia and Ryanair were all up. They lost some of those gains later in the week.
The share price rises gave a glimpse of where Irish stock valuations could be if the Brexit uncertainty was dealt with.
Unfortunately, every investment in Britain and Ireland, from currency to shares, is now a punt on how you believe a section of the British Conservative Party and the DUP are going to act. How did it come to this?
Sunday Indo Business