Wednesday 20 February 2019

Shane Ross: Close shaves are called for

MINISTER for Health James Reilly has one. NTMA boss John Corrigan has one.

A Mercedes?

Union boss David Begg has one. Pensions supremo Brendan Kennedy has one.

A chateau on the Loire?

Siptu chief Jack O'Connor has one.

You've guessed it.

Bushy beards were once the preserve of the bourgeois brethren of the revolution. Today they are sprouting in the ranks of the chief executives of the semi-states. The super quangos are beginning to demand that no one worthy of the top job reveals the colour of his chin.

God forbid, chinless wonders could soon become de rigueur in the private sector.

Last week were you startled to see yet another man with a beard on the platform, presenting the results of a report into fees and charges in the pensions industry?

You did not recognise him? That is the way he would like to keep it.

Brendan Kennedy, the bearded boss of the Pensions Board, sat alongside Orlaigh Quinn, assistant secretary of the Department of Social Protection, and principal officer Patricia Murphy at the launch of the less than startling findings of the inquiry into pension fund charges.

Less than startling to you and me, but apparently a revelation to bearded Brendan. It was a subject on which he had been less than eloquent in the past.

This underwhelming report took over a year to surface. It cost fifty grand. The fifty grand went to PwC -- of all firms -- after a tender process. Has there ever been a tender competition lost by PwC?

Brendan was a member of the report's steering committee. He helped the authors to reach their findings .

PwC was asked to discover whether pension charges were "reasonable and transparent". You would think it had set out in search of the Third Secret of Fatima.

The dogs in the street knew the answer to that one. Multiple scientific surveys and media probes have come to the same conclusions. But the State needed the dreaded combination of favoured accountants PwC, the moribund Pensions Board and the Central Bank to confirm the overcharging racket.

They should have asked George Lee, who exposed the scam in his and producer Niamh Sammon's brilliant RTE show Pension Shock in 2011. Bearded Brendan had, strangely, refused to be interviewed for that programme. Perhaps he never watched it either. He could have saved the State fifty grand if he had.

Or PwC could have asked for an advance copy of The Untouchables, the new book by Nick Webb and myself, which devotes a chapter to the reasons, including crippling charges, why Ireland's pensions are in such deep manure. (It also gives plenty of unfavourable coverage to PwC, favoured consultants of Irish governments.)

One of the reasons for the tanking of pension values is the failure of Brendan's Pensions Board to warn of the excessive charges imposed by a totally untransparent, inexpert and greedy industry.

The report is full of the usual rhubarb necessary to justify PwC's outrageous fifty grand fee. Even the executive summary is stuffed with cotton wool. Insiders described the fees issue as "complex" -- which it is not. Indeed, it is one of the most uncomplicated questions in the whole rotten financial sector.

Overall pension fund charges are a rip-off. The language of the report is less colourful, conceding that "overall, individual pension arrangements are expensive". In my book, that is a reluctant admission that we are being robbed blind.

The second question, transparency, addressed by our favourite consultants makes a laughing stock of the entire industry. The report is unable to acquit on the lack of transparency charge either. It grudgingly concedes that "there are deficiencies and inconsistencies in current practices regarding transparency and no culture of providing clear information in a simple manner was evident..."

Its solution: "further research". That way we will all find out "the drivers behind consumer choice of individual pension products".

"Further research" -- the last refuge of scoundrels in suits. That should mean at least another 10 years of overcharging. The industry can breathe a sigh of relief.

The report rejected the obvious solution of capping pension fees and charges on the extraordinary grounds that it "could encourage a move to the top and discourage competition".

What a cop-out in an industry where fund managers already operate a cosy cartel.

The report decided that increased transparency would solve the overcharging problems. The authors concluded that once consumers were aware of the high charges they would shop around and bring prices down. They are living in outer space, tacitly denying the experience of bank customers. Despite the clear evidence of overcharging by the banks, customers are lethargic, deeply reluctant to change their banks. Ditto pension fund members.

Nevertheless, the authors provide a stunningly simple example of the devastating effect of the charges on an average pension. If a person aged 35 saves €250 a month for a pension for over 30 years, they create a fund of €200,000. They should receive a pension of €10,000 a year on retirement.

Sadly, if the average (but outlandish) fee of 2.18 per cent is applied to the fund, the final pot is reduced by 31 per cent or €62,000. The pension will fall to €6,900. If a higher fee is applied, the pensioner loses even more.

The difference is gobbled up by the vultures in the industry.

The report absurdly concludes that once pensioners understand that they are being robbed, they will then change managers.

PwC fails to find that the answer is to force the industry to change its wicked ways. The innocent, often ignorant -- invariably captured -- consumer will have to sort out their own problems. The rogues with their paws in the pensions pot will be allowed to continue operating the old racket. Education and more transparency will sort them out.

So the report admits both abuses -- lack of transparency and overcharging. Then it bottles the solution.

All is not lost. There are plans to take the report further. The Government has decided to seek "feedback".

By the time the "feedback" comes, the same pensioners who have been hit by a pension levy will be clobbered on the double by a budget reduction in the tax relief enjoyed by subscribers to pension funds. The victimisation of pensioners is relentless. So the doomsday question beckons. Is it time for prospective pensioners to cease paying savings into pension funds?

The rip-off is set to continue. The State and the industry will share the spoils. It used to be just the industry. Now the duo are united in a plundering party.

Bearded Brendan must be smiling. He's been boss of the Pensions Board for six years. In the statements he makes for the annual report, his only recognition of pension fund charges came this year. After mentioning that the "study" was set up, he makes the earth-shattering disclosure that fees are a "complex" issue which will give rise to "technical" questions.

He then rapidly passes the parcel, dumping it onto the trustees, the industry's last surviving nobility.

I cannot recall a single word of warning about pension fund charges from Brendan, the national guardian of the pensioners' interests, during his tenure at the top of the Pensions Board.

Nothing to do with his beard.

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