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Charlie Weston: Workers left with burden while retired all sit pretty

ONE of the more surprising survey findings we came across recently was that most of those approaching retirement consider themselves financially secure.

Despite the current economic turmoil, over two-thirds of those approaching retirement say they are financially fit.

This is according to a survey commissioned by the Retirement Planning Council of Ireland.

Also interesting is the fact that the current economic climate seems to have little effect on the plans of soon-to-retire individuals.

Almost nine out of 10 responded that their plans to retire would not be postponed due to present economic conditions in the country.

Good for people who are about to retire.

However, we are witnessing the rapid decline of defined benefit schemes, the traditional company pension plans.

Those who have retired or are about to retire, on the other hand, are reaping the benefits of these collapsing company pension schemes.

There are around 280,000 people in defined benefit pension schemes, either still paying in or deferred (ie have left the scheme, but are still not at retirement age).

Around 66,000 people are drawing benefits from defined benefit schemes, according to Pensions Board data.

Some three out of four defined benefit schemes are in deficit, with the combined deficit amount totalling €13bn.

The deficits are due to a toxic combination of low interest rates, very poor stock market returns over the past few years and the greater expense of pension schemes due to the fact that people are living longer.

Stock market returns have been so bad that over the past three years the average managed pension fund in this country fell by an average of 7pc a year over the last three years.

Minister for Social Protection Eamon O Cuiv announced yesterday that the deadline for schemes in trouble to come up with a plan to plug the deficit is to be extended for a third time.

This is positive, but smacks of a 'delay and pray' policy in the hope that the financial environment will improve.

In the meantime, those who are retired are sitting pretty.

The current pensions rules give those already retired priority rights, which are unfairly detrimental to the rights of those still working.

On the other hand, those still paying into a pension are shouldering the burden of reduced benefits as employers are unable to meet the shortfalls.

Irish Independent