Let’s not make a burden of elderly – our pension crisis was created by policymakers

Charlie Weston reported on January 20 that the Commission has been briefed by the CSO and the Fiscal Advisory Council (IFAC). The deadline is tight and we need the Commission to succeed.

The first way to make a burden of the old is to raid their pension fund. Pensioners were on the receiving end of the 2008-2011 economic crisis when their National Pensions Reserve Fund (NPRF) was later abolished as part of the bank bailout.

Based on the sales revenue from Telecom, and the annual transfer of 1pc of GNP, independent management and international investment, the fund was not to be touched until 2025.

Michael Somers, former chief executive of National Treasury Management Agency, estimates the projected €140bn in the fund by 2025 would have covered only two-thirds of the pension liability accrued. The NPRF was criticised because it made the public finances look worse in that the 1pc transfer of GNP reduced the funds available for current expenditure, both public and private.

Abolition has made life even easier for large-spending departments, as noted by the IFAC, weakened public expenditure assessment and controls, emboldened stimulus cheerleaders and left a large hole in the pension fund. Blaming pensioners because others raided their pension fund is a guaranteed way of making a burden of the old.

The second way in which Ireland makes a burden of the old is in exaggerating the size of the perceived problem – 13.8pc of the population of Ireland is over 65. That does not qualify for the top 50 nations with shares of the population over 65, ranging from Japan at 28.2pc at number one down to North Macedonia, ranked 50th with 14.1pc. There are at least 50 countries ahead of us in developing policies in relation to their older citizens.

The third way to make a burden of the old is to exclude them from working.

In the 2011-2016 Seanad, Senators Feargal Quinn, John Crown and I sought to abolish compulsory retirement. We did so because of the loss of human capital, skills, training, entrepreneurship, etc, that results when retirement at 65 excludes from paid employment persons with 20 years’ life expectancy.

TCD’s William Campbell from Ramelton, Co Donegal, and Campbell College, Belfast, won the Nobel Prize for medicine in 2015 at 85 years of age. The burden to society of shutting off people over 65 from work will increase as years spent in education increase. A further five years’ life expectancy is expected in Ireland by 2050.

The fourth way to make a burden of the old was to compel them to sign on as unemployed at age 65 until eligible for a pension at age 66. This caused much annoyance to that cohort.

In the short time available before June 30, the Commission will have to inform itself and us what proportion of people wish to retire at each age. Our Seanad proposals referred to the abolition of compulsory retirement only.

The fifth way to make a burden of the old is to imply they are a burden on the health service. IFAC estimates the cost of providing healthcare to the ageing population will be €484m a year. When added to the annual pension costs of €370m from 2021 to 2025, this gives an estimated bill to the Exchequer of €854m a year.

Attributed health costs of the ageing population are 57pc of the total estimate and 31pc more than the estimated pension cost of ageing.

Ireland, which does not make even the top 50 countries in population over 65 at 13.8pc, spends 12pc of Modified Gross National Income (GNI*) on health. Japan with 28.2pc – double Ireland’s – spends 10.9pc of GDP on health.

Italy, with the second highest number of over-65s, spends 8.8pc. Germany, 55pc higher than Ireland, spends 11.2pc. Spain, with 19.1pc of its population over 65, spends 8.9pc of GDP on health. Its health services cater for 38pc more over-65s than in Ireland on a 26pc lower health spend in relation to GDP. Life expectancy in Spain exceeds Ireland’s by 14 months

How Ireland combines one of the highest health budget shares of GNI*/GDP with a proportion of over-65 population not yet in the top 50 countries in the world is remarkable. Pre-pensioners here bear that responsibility for a high-cost, low-productivity health service.

IFAC has warned of this problem for several years but we have not heeded its advice over the rapid growth of Irish health spending and recruitment.

Japan, Singapore, Switzerland, the EU, Australia, New Zealand, and Canada combine long life expectancy and high living standards.

In 2019 the UN estimated global life expectancy at 72.6 years. In 1950 the longest was in Norway at 72.3, less than the global figure today. The world average today exceeds that of the highest in the world a lifetime ago. That is welcome.

How Ireland, not in the top 50 countries in the world in terms of the share of population over 65, has managed to create a pensions “crisis” is a study in disfunctional economic policy-making. That should be addressed by the Commission on Pensions.