National Pensions Framework

The new National Pensions Framework is available here (press release here). 

Details are surprisingly sparse in places for a document so long in the making.   But the proposed reforms are generally sensible.   It is also good to see recent behavioural economics research having an impact on policy.   Some highlights:

·         The retirement age is to rise in stages, reaching 68 by 2028.   While this is unlikely to be the end of the increases, it provides a good start in terms of reducing long-term fiscal imbalances.   Getting better control over long-term finances will also help boost near-term creditworthiness, especially as the NTMA attempts to issue 30-year bonds

·         The new auto-enrolment scheme (to be launched in 2014) is well informed by work in behavioural economics.   The design details generally make sense: automatic enrolment (with automatic re-enrolment after two years for those who opt out); matching government and employer contributions; low administrative costs through utilising the PRSI system, and low-cost investment defaults

·         Tax relief standardised at 33 percent rather than at the marginal rate.   This is high enough to provide an incentive for pension provision, while getting rid of a regressive feature of the old system

65 thoughts on “National Pensions Framework”

  1. Am reading the document closely but, at first glance, it looks like a positive step. The first national application of this new literature. The increase in pension age is also something many serious analysts have been recommending. They will need to work more on the simplification aspect of the pension roll-out both for the employers and the employees. It will also be interesting to see how the usually strong effect of auto-enrollment is mitigated by the very tight household financial conditions.

  2. Employers do not want old people on their books – and even older people even less! It’s a fact of life. So what happens, will we pay the dole from 65-68 instead of old age pension? Hi caramba.

    Has any DC scheme beaten a DB scheme over the past few years (or ever)? No? Well so what. Let the plebs take all the risk for their pension investments.

    Neo-liberalism really has siezed the agenda hasn’t it.

  3. What about people who will see the age of retirement rise and rise and who already have put in many years at the coalface and who are also now seeing their empolyers attacking their pension.
    But hey if we can’t have foreigners and college students filling the shelves in the supermarkets we might as well have people in old age getting min wage to do the work such so that they can live hand to mouth!

  4. “The retirement age is to rise in stages, reaching 68 by 2028. While this is unlikely to be the end of the increases, it provides a good start in terms of reducing long-term fiscal imbalances.”
    Hi caramba indeed. It’ll be hi karate if I get near the authors. I guess I am not sensible about this subject, but as one of the saps in the real economy with only a DC pension, that I have paid into all my twenty years on this earth and that is looking like giving me the equivalent of a shop-assistants wage after 40 years of work, I can only conclude that the sensible people talking about this are all on defined benefit pensions.

    So hands up every poster who makes a post on this thread – admit your bias – DC or DB, will you be affected or not? (Do you have a reliance on the state pension to determine when you retire).

  5. A discussion of State pensions that doesn’t include the words “Canada Pension Plan”? One hopes they at least looked at it even if they don’t say so.

  6. Raising the retirement age, O.K. but will it work for all professions?

    Just one example, discipline in Secondary schools appears to be harder and harder to enforce each year.

    Some teachers are not getting the support from their respective Principles and Vice Principles in some schools. Hence the stress levels are rising with a corresponding toll on a teachers health etc.

    I am not sure a teacher will be able to teach after 43 years of abuse. This could work against the educational system.

    Unless of course the Dept of Education is determined to rigidly enforce discipline upon out of control students.

  7. @John McHale
    There is no such thing as coincidence.

    – The government needs to raise taxes and/decides to limit pension relief
    – Pension industry goes nuts
    – Huge hole appears in banks balance sheets

    “Getting better control over long-term finances will also help boost near-term creditworthiness, especially as the NTMA attempts to issue 30-year bonds”

    Especially true if we don’t wipe out the subordinate bondholders and give the seniors a small haircut to fund bank recapitalisation.

  8. I hope this is even more useful to assess behavioural economics.

    As I understand it the other big move will be the replacement of PRSI (which has a gizillion variants – my wife is an accountant and she cheered at the thought of just one rate) with a sort of public service contribution payable by all on all income (so including self employed etc etc).

    By being everyone on everything they earn it will raise about the same as current PRSI so that maintains current PAYG liabilities. Indications on this suggest a 2/3% rate instead of current PRSI rates.

    But I presume that the auto-enrolled rate of circa 4/5% in effect will bring most folks back up to the current PRSI levels. So they will be not any worse off, perhaps on both employer and employee sides. But now we won’t have all of the kinks and knots in the PRSI schedules.

    So simpler PAYG funding system, and a combination of employer and employee contributions that will work out at about the current deduction level, so nobody should feel worse off.

    Or will they…?? Of itself this is an important research question about how folks perceive net and gross income. Colleagues like Liam Delaney will I am sure lay out the key questions.

    What I am worried about is the reliance on the private providers for this initiative – they don’t do a great job of pushing these products at the minute and the nature of charges etc seem pretty shocking (that accountant I married has worked out that with low returns and with high charges, even with the tax treatment you might be better off with other savings products, particularly if access to funds is important).

    Secondly, on the point of inaccessibility of funds, of course that is in the main a great idea but Government would want the ability to change their mind on that without too much grief particularly when relying on the private sector to provide the product. If we hit a major downturn, or major shock, shoveling money into funds that are losing money or releasing other assets when you have a pot of money falling in value would seem dumb – the flexibility in allowing folks access 401K plans in the US without normal penalties was in effect part of the stimulus package there. Perhaps a more sensible plan relates to the state element of the contribution – like the SSIA could folks have the choice to access their fund but lose the Government contribution?

    ANyway, early days, and more detail would have been nice, but this is all in all a very sensible move in the right direction.

    My usual plea – PLEASE can we start collecting income and household asset holding data in routine surveys like the QNHS as other countries do – I mean, Jesus wept….! And can we PLEASE get a research team working on the rollout and implementation of this one so we can tweak and fine tune as it evolves.

  9. I dont see the problem here. Life expectancy has risen by around 10% since 1990, will probably me more like 15% by 2028, and we’re planning on increasing the average working life by around 5% over the same period. Moreover, the average period spent in retirement will probably have doubled in that timeframe, ie from 10-12 yrs to 20-25 years. And then we need to take into account that most people’s total working lives have actually decreased due to increased education etc. Eminently sensible stuff.

  10. @Sporthog:

    “I am not sure a teacher will be able to teach after 43 years of abuse. This could work against the educational system.

    Unless of course the Dept of Education is determined to rigidly enforce discipline upon out of control students.”

    A tempting digression …. Why assume that people should “be teachers” (as opposing to teaching) throughout their working lives? Hire them for five years, then ban them from continuing until they’ve spent at least five years doing something else. Teaching is something that people might drop into and out of.

    bjg

  11. Lord Adair Turner, who is the current chairman of the UK’s Financial Services Authority, said in Dublin in October 2006, that his Commission on Pensions in the UK had recommended a system which would automatically enrol employees in a pension from the time they began working unless they themselves choose to opt out of the scheme. This was necessary, he argued, because “a purely voluntary system was not going to work….employers won’t provide adequate pensions for employees and individuals won’t go out and buy pensions themselves.”

    On Wednesday, Brendan McGinty of business group IBEC and Patricia Callan of its Small Firms’ Association unit, both opposed mandatory pensions.

    They both have occupational pensions themselves, likely defined ones.

    I generally applaud these proposals.

    The next reform surely is to scale back the totally disproportionate public service pension system.

  12. I thought there was some plans to help bail out insolvent defined benefit pension funds by allowing them to buy annuities at cost from the state (not a pensions expert but I’m sure I heard something on this)

    How does this new proposal stack up? Is it similar in principle, that the state will provide a low cost model with something like the defined benefit bailout…. Or is it just making stuff mandatory so the finance professionals have more captive customers.
    Or is it something in between?

    It seems pension reform only seems to work in one direction;
    1) the government still supports entrepreneurship by denying pensions and dole to self employed who pay in to the system.
    2) Pensions are still paid out to serving TD’s ministers etc.

  13. “So what happens, will we pay the dole from 65-68 instead of old age pension?”

    Since they will have been made redundant in their 50s they won’t be eligible for the dole. Problem solved.

  14. The reform on age is long overdue, we have traditionally indexed benefits in line with inflation but never did the same with age v.s. life expectancy.

    bismark set retirement at age 70 in the 1870’s when life expectancy was 45. since then we’ve nearly doubled life expectancy and dropped the retirement age! This move alone was perhaps the most vital piece of reform.

  15. Prize for least useful contribution so far to the pensions debate goes to ICTU’s David Begg.

    On Morning Ireland today he condemned the idea of money going into private pensions on the grounds that it was rewarding pension fund managers who had done such a bad job in the past. For instance, he pointed out their terrible record in 2008. In contrast, he recommends that the money all go into the National Pension Reserve Fund, which, he told listeners had a pretty good record—indeed it had made a good return in 2009. David did not comment on how the NPRF had performed in 2008 while Irish pension funds were destroying wealth all around them.

    There are issues in relation to expensive fees for Irish private pensions but this kind of “Public good, private bad” stuff doesn’t help.

  16. Do you know why many private sector workers never invested in pension schemes?

    Well, apart from the fact that the lower paid couldn’t afford them, they could smell a scam.

    They saw pension fund managers and brokers creaming off fees and bonuses on top of their inflated salaries while their money was invested in wizard financial engineering schemes which collapsed with the next financial crisis.

    Now Irish workers are to be forced to subsidise part of the financial aristocracy. A portion of their wages will be taken from them and frittered away on the financial ‘innovation’ du jour.

    We could, instead, have given people an opportunity to buy bonds in the ICT and renewable energy infrastructure we so badly need with some kind of government guaranteed return. That would give pensioners confidence in their investment, while seeing their money go to some good use.

    Oh, sorry, I’m offending the ‘public bad, private good’ assumptions of this forum.

  17. @karl deeter:
    “bismark set retirement at age 70 in the 1870’s when life expectancy was 45.”

    Are there some words missing there? Life expectancy at birth may have been 45, but life expectancy at 69 probably wasn’t.

    bjg

  18. I think the Maths supporting private pensions does not add up. Given the exceptionally high fees and record of incompetency of Irish pension fund managers, does it really make sense to push everyone into contributing into private pensions? As Colm Harmon’s wife pointed out, private sector workers may actually be better off using other saving products. And that is before the outrageous rip-off called annuities. Sarah Carey had a column about this. I think the decision of most private sector workers to stay outside the private pension system has been a rational one. It is a good proposal by the government but the devil is in the details.

  19. @ Brian J Goggin,

    Sorry I was away from the computer for a while. In relation to your comment about enforced 5 year breaks from teaching in schools. I have my doubts about your idea.

    I don’t wish to pour cold water on your scheme, but I ask you would there not be logistical problems? For example Ireland is a small country, with a small work force. If 3000 English and History teachers were to be let go for 5 years would it be possible for them to be replaced by another 3000 qualified workers etc?

    In addition Police clearance checks would have to be undertaken for the new batch of teachers, so the paperwork is already mounting up. We might also end up discouraging people from entering the profession, why would a person study English + Geography in 3rd level for 4 years when their chosen career might only last 5 years? After which they find a job at somthing else in the private sector.

    For teachers living in rural areas, after completing 5 years of work in a school, where do they go now? The small town in their locality might not support them, they might have to sell up and move to one of the larger towns like Cork, Dublin etc. Uprooting their family and leaving friends behind every 5 years is not attractive to most people. Some people enjoy stability.

    How would the dumping ground schools cope? If the student population of a particular school is known as a dumping ground for abnormally boisterious students you may find teachers are only too happy to leave after 5 years, but there are no new applications.

    Your idea could have merit, perhaps it is already in operation in other countries, I am not sure. But I see large logistical problems.

  20. @ Karl Whelan,

    On the pension funds and their managers doing so poorly (or not); why not have a type of “pension account” that the banks could administer?
    Benefits:
    No administration fees (well the banks will take their usual bite)
    No risking your pension on stock market fluctuations
    Money is guaranteed to be there when you retire
    Tax relief still applies so you get the benefit of the top-up this gives
    Also, the banks could pay a low rate of interest and that would be a boost to their deposits in the long run.
    What are the disadvantages?:
    Pension industry up in arms?
    Anything else?

  21. @brian j goggin assumed you’d figure I was talking about life expectancy on average, not on either end of the norm, equally a kid in the 1870’s with polio might die age 4 and average life expectancy wouldn’t save his hide and bring him magically to 45.

  22. @ Garo

    maybe im missing something, but whats the alternative to the private pension system? Do you simply mean have the NPRF administer it, or are you talking about something altogether different? When you say that people have been rational to avoid it, its not like they’ve been investing in something else, they’ve simply avoided saving altogether in many cases.

  23. Does anyone know how the new pension ages were arrived at? Were up to date actuarial projections of life expectancy used?

    I seems a good first step, I like the phasing in of higher retirement ages, but the ages seem a bit low and no doubt will have to be revised as life expectancy increases, no?

  24. It also seems like we’re very late to the game in this, didn’t the UK parliament vote to raise the retirment age 4 years ago?

    At least we’re not Greece!

  25. @Sporthog:
    “Your idea could have merit, perhaps it is already in operation in other countries, I am not sure. But I see large logistical problems.”

    These are all minor details: “‘That’s not my department’, says Wernher von Braun.” The main thing is to force teachers to keep in touch with the real world. You pointed to some disadvantages of their jobs for life; I can think of some others. But it is not essential that teaching operatives have jobs for life and perhaps the state should be encouraged to think of other staffing models. That would, of course, require more consideration than my off-the-cuff comments get, but it should not be subject to the teaching unions’ veto on threats to their members’ rent. Let’s not waste the current crisis.

    The pensions-related point is that the new national system should provide for maximum mobility between public-sector employment, private-sector employment, self-employment and other forms of activity. Thus it should be made easy for, say, a 55-year-old experienced production manager from high-tech manufacturing industry (which is not a description of me, by the way) to spend some years in the education industry. Pension schemes are of course but one of the obstacles, which is why I broadened the topic above; apologies.

    bjg

  26. @karl deeter:
    I’m sorry to be a bore, and I confess that I have forgotten most of what I knew about statistics, but I do not recognise the concept of “life expectancy on average”. My understanding of life expectancy accords with that given by Wikipedia (usual caveats apply): “Life expectancy is the expected (in the statistical sense) number of years of life remaining at a given age.”

    bjg

  27. @ BjG

    the problem with your understanding is that something like “significantly decreased infant mortality rates” would have absolutely no effect on the life expectancy of a 5 yr old child, or indeed any taxpayer, even though it would obviously have huge effects on average life expectancy and on how a govt should go about setting up and funding various aspects of our society and economy.

  28. The argument above that teachers shouldn’t be teachers all their lives has some merit although that’s true of most people (like the 5 people per century who get to be RTE newsreaders and then work till they are skeletons)

    However, a better argument here is to making teaching a more flexible profession to join with a view to something more than sub teaching, particularly for those who have had a different career and who can impart a little more to their students and colleagues than a few years of BA/HDip. Instead we see TDs having permanent jobs kept open for them leaving those leaving the education training system scrabbling for a position and hoping to run into a Principal they know who has an opening (reminiscent of the junior officers “on the beach” in the Royal Navy of Nelson’s day)

    Similarly, we should be looking at the workforce and thinking about what opportunities there are for “burned out” teachers to rejoin the labour force rather than expect them to permanently leave employment and become dependent on pensions at 50ish.

  29. @ Brian J Goggin,

    Very interesting expansion of your original point. Thanks for that. Perhaps the new Pension Regime will be the first step along the road to this strong matrix type workforce you suggest.

    Time will tell.

  30. @Sporthog

    Not to worry – Minister Bat_een has just subcontracted all teaching to Seven_of_Nine’s new company – she will simply transport the lot of them [students] onto the holodeck on a three shift cycle and plug them in. The supervisors on the holo-deck, as BJG suggests, will be real-world engineers, foremen, business people, wise older people, plasterers, brickiies, midwifes, software teckiees, gardeners, bin_men, laid-off traditional head-shop assistants, and laid off bankers ….. and all students will graduate with 1-I first class diplomas and degrees – hence finessing the critiques from Google, Intell and co and you and yours are not up to the job. Of course, Sporthog, Bat_een is going to fire all the teachers, thus saving the exchequer €billions, which he is going to re-invest in Seven_of_Nine’s new company as she plans to expand overseas – and as you know, we have to export ourselves out of this recession/depression. The end of history, one might say!

  31. @All

    for those with an interest in Behavioral Economics – this link provides a 20 minute video introduction to such thinking – Daniel Kahnemann – and probably required viewing for all in Oireachtas and Dept of Finance – well_being in the later years ………

    http://www.ritholtz.com/blog/2010/03/daniel-kahneman-the-riddle-of-experience-vs-memory/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

  32. @Eoin:
    ” “significantly decreased infant mortality rates” would have absolutely no effect on the life expectancy of a 5 yr old child, or indeed any taxpayer, even though it would obviously have huge effects on average life expectancy and on how a govt should go about setting up and funding various aspects of our society and economy.”

    But if I were intending to do something that would significantly decrease infant mortality rates, wouldn’t I want to look at life expectancy for each of the ages 0 to 5? Why would this “average” interest me?

    Similarly, if I wanted to do something about pensions, wouldn’t I want to know something about the life expectancies of those of, and beyond, working age? An “average” (how computed?) doesn’t seem to provide enough detail for policy-making.

    bjg

  33. @Joseph
    Has any DC scheme beaten a DB scheme over the past few years (or ever)?

    I’d wager members of *all* DC schemes did better than those members members of the Waterford Crystal DB scheme not yet retired.

  34. @ BjG

    i think it’d only be a relevant issue if there was a difference in the rate of change of average life expectancy vs the rate of change of life expectancy for a 68 year old. I’d suspect they’re broadly similar, no? I agree with your basic principle, but im not sure its a problem here which one you use, provided, in fairness, we understand that there is a difference between the two.

  35. @Eoin: No I absolutely do NOT support the NPRF. What I’m asking for is really low-cost index funds like the Fidelity Spartan international Index fund. You know what the expense ratio on that baby is? 0.10%!! Or the Schwab US Large cap. 0.08%! Plain vanilla index fund with no complications and no fat cats to cream off the top. What is the lowest expense ratio for an Irish run fund today? The average is 1.25%!!

    BTW, you hit the nail on the head without realizing it as far as the life expectancy issue is concerned. The vast majority of improvement in life expectancy at birth since 1840 has come due to improvements in child mortality. Life expectancy at 50 has probably not doubled since 1840. it has undoubtedly increased but not by as much as life expectancy at birth.

  36. A lot of good thinking, but a critical failure is not offering specific benefits for specific contributions and leaving people wide open to stock market risks.

    Surely part of the package should be State-guaranteed bonds with a return matching inflation, easily available with no/minimal mark-up by the industry. Not as good a return as the equity numbers used in the pensions industry promotional literature, or even by actuaries, but a potentially low-transaction-cost approach for the risk averse and a good way to fund government borrowing.

  37. Particularly noticeable that there is no change to Politicians Pensions which are outrageous by any standards. How can they be entitled to full pensions after 20 years as TDs and lesser years service for Ministers and worse still they can collect multiple pensions from the State and also be paid Pensions whilst still in the service of the State. We even have TDs/Ministers who subcontract their day jobs from the State ( teachers), make a profit on employing a sub and then become entitled to another pension. There are lots of eejits in the media etc who have not picked up on this abuse.

  38. Very happy with the auto enrollments, the “inertia” and “procrastination” problems of getting people into pension schemes in the past will now be used to make sure they don’t bother to get out of it! Pat McArdles says that this is often the case internationally in today’s Times but he didn’t mention which countries. Anyone know?

    @Joseph, I was debating this with my 51 year old father last night (who narrowly avoids having to work until he is 68 for the moment) and he made the same point re: employers not wanting to employ people of this age. Is there no case to be made that 65 year olds+ in this day and age are far more productive than they were 20 years or so ago?

    One of the Elderly Action groups, possiblt Age Action, made the point that someone who has being undertaking physical labour their whole life won’t appreicate this. Can’t help but agree.

  39. Just regarding Colm Harmon’s comments re an across the board new PRSI style levy, if this isn’t to be levied on welfare recipients surely it will further increase the poverty trap, then again maybe it will be!

  40. Usual guff and nonsense. The mandatory pension sign-up is as a scam. You have to have an annual incremental increase in economic activity in excess of that promised in the prospectus to ensure such a Ponzi scheme will pay out – not to mention the mandatory commissions and bonuses!

    Permagrowth, and its accompanying financial paradigms are dying – the most recent credit boom did for them. The dreadful debt overhang cannot be cleared absent an approx +7% annual increase in economic activity for 10 years. Anyone believe this is remotely possible? No, I thought not. So you had better conjure up some scheme to deal with this debt which allows for only an annual +1% – if we can even achieve this, which I doubt. Current real interest rates are allegedly in excess of 6%??? Should be funny when this climbs toward 10%.

    Growth, if any, will occur east of the 90th Meridian. Mercantilism at its worst! Good part about this is, they will have to buy their own trash – we won’t be able to buy it. We will be existing on the clippings after all those levies etc, have been taken from our earnings. Interesting Times indeed.

    Better start that lateral thinking.

    B Peter

  41. Re: expensive pension providers
    At the moment we have to use Irish pension providers. Why is this? Is it not a restraint of something under EU law? If we could avail of a wider pool of providers, would that assist us DC people?

    Re: retirement at 68
    I’m not fit for much than I already do at 41. By 65, I was expecting to be fit for nothing. 68 seems a looooong way away.

  42. Agree with BP Woods “The mandatory pension sign-up is a scam”. Anybody know the cost of an annuity today. Since the annuity rate is usually in or around the going interest rate that would make it around 2% max I would guess. To purchase an annual income of 40000 you would need to have a fund valued at > 2 million. The figures are just crazy and all the funds are losing money with the possible exception of cash funds which are neither gaining nor losng but the managers still charge a percentage to “manage” them.
    As that economist said one time “there are idiots – look around – they’re buying annuities”

  43. @ All,

    I linked this before, but it is worth linking again. The guys have a great sense of humour about the whole thing – and describe so well, how their particular generation got away with a free ride, so to speak.

    The U.S. Economy: The Last 50 Years and the Next 50 Years

    Franco Modigliani
    Paul A. Samuelson
    Robert M. Solow HM

    September 18, 2000

    http://mitworld.mit.edu/video/76

  44. The other big issue, facing Ireland as well as every other country, apart from aging population bubbles, is the family – the middle class family without a doubt, is going under with debt. Check out anything on that subject on YouTube etc, by Elizabeth Warren, worth a watch. BOH.

  45. OPM

    Other Peoples Money. This is the source of all sustenance for parasites who produce nothing themselves. The demise of all the banks and the loss os such sustenance must be made up somehow. I know, get the working poor to do it. Tell them it is for their good. But make it mandatory. We can decide what to use it for and when it is big enough we can use it for the natuional good and appoint some ex-politicians and public servants to it.

    OPM:- U KNOW IT MAKES US WEALTHY!

  46. I just noticed in the green paper this:
    “The cost of annuities has increased significantly over the last 10 years because of
    falling interest rates and improvements in life expectancy. The current cost of
    purchasing an annuity to provide a pension of €10,000 per annum for a 65-year-old
    man, including consumer price index increases but no provision for a widow‟s
    pension, is approximately €220,0004.”

    I presume they got this figure from reliable sources which makes my estimate in an earlier post look rather more pessimistic. It puzzles me though, because that makes the annuity rate about 4-5% and I know for a fact it was 3% about 4 years ago. With lower interest rates now I would expect the AR was also down – not up.
    Can anybody (John?) confirm if the figures in the green paper are correct
    Still it makes no sense to me why anybody with even €220,0004 would anything so stupid as use it to purchase an annuity worth 10,000 a year. First of all they would need to survive a further 22 years to just get their own money back so-to-speak. A deposit
    ARFs OK are a better option but most existing DB scemes I suspect are locked into purchaisng annuities at those kind of costs. Which is a large part of the reason why there is a major probklem with pension funding right now. If they didn’t have to purchase annuities a lot of the apparent “underfunding” issues would disappear.

  47. a couple of observations:

    1) many people in the private sector are currently contracted to retire at either 60 or 65 so they will have a big hole to fill until they reach 67 or 68 or possibly even 70,

    2) a disgrace to leave the guards, defense forces (what after all are we defending), judiciary and the body politic entitled to their current entitlements- retiring at 50, pensions whilst in the Dail etc

    3) a major shortcoming in expecting people not to opt out if there is no guarantee that their funds will still be around when they come to retirement age-some form of insurance e.g. insuring that at least the capital value of what has been put in is there in the end when you come to retire

    4) public sector practically ignored there simply will not be enough money there to meet existing commitments

    5) the late Seamus Brennan referred to the possibility of mandatory pensions in 2005 what has Cowen been at since then

  48. @ McHale , Delaney and other Behavioral oriented

    One area where this approach may be useful – and I have not seen anything substantive published on it – all these senior people in Garda, Revenue, other public service taking ‘early retirement due to fear of pension sump sum’ being taxed etc ……….. the effect : serious loss of experienced human capital in certain areas – particularly in Garda re organised crime – but also in other areas – and simultaneous embargo on ‘promotions’ due to present fiscal policy ………… all leading to less effective institutions of state …………… and other anomalies – such as young mental health professionals emigrating to UK while those who have ‘retired’ being re-hired as ‘consultants’ and in the education sector as well …………… and all this ‘guff’ on ‘reform of public sector’ ………. plenty for behavioural economists to get stuck into here ……….. btw – how many such economists in Irish 3rd level at the mo? How many Master degrees, PhD grads etc ………….

  49. I have just started John Kay’s The Long and The Short Of It.

    I intend opting out of paying into a private pension fund based on Mr. Kay’s advice.

    Why pay 2% per annum of my savings to people whom I have no faith in to act intelligently with my interests being paramount? I’d rather play a game of soldiers.

  50. @zhou
    “Why pay 2% per annum of my savings to people whom I have no faith in to act intelligently with my interests being paramount? I’d rather play a game of soldiers.”
    Indeedy. The only rational reason is because you get to skip giving 40% of it to the state… now if you could just burn it tax free…

  51. I expect that I will be entitled to set up a privately managed pension and still keep avail of the tax benefit.

    Do we really need to give the pension tax break at the moment? Would we not be better off if people saved less for the next couple of years and we could tax their entire earnings? What would Krugman say?

  52. @ Aidan McGrath

    I just ran an annuity quote using the details above (assuming 3% escalation rate on pension and that the pension would be payable for a mimium of 5 years) and the equivalent annual pension works out at €10,031.

    According to the framework document the ARF option will be available to all DC pension scheme members from 2011. However, they are considering raising the bar on the guaranteed income for life condition [to become eligible for ARF] from €12,700 to €18,000.

  53. Are the people introducing the new private pension regime going to give up their state backed defined benefit pensions and join us in their new schemes?
    or are they going to claim a pension after 3 years of service at age 40 odd, while getting a salary from the state and then getting paid 12k per annum to travel to their work from Dublin to another part of Dublin?
    To be Honest, I’d expect the minister of health to abandon her private health insurance and rely on the state health service she’s supposed to be running first.
    And I don’t expect that even a tiny bit.

  54. @All

    Found time for a quick scan.

    At least positive that this issue is being addressed – and the equation has to be citizen, capital, state – course I know these terms not used around here – ……. but no mention on the ‘self-employed’ ……… a neglected species ………….. but a start ………. something to build (sic) on and get stuck into in the next few years.

    The Equation to be addressed is: Citizen, Capital, State = Pension

  55. @Gerard Sheehy
    You didn’t mention the AR you assumed for your calculations. I estimate it at between 4 and 5%. The problem I have is that I suspect a much lower AR is current therefore the cost of 10,000 should be more like 400,000.
    Also most existing DB schemes (at least non-contributary) probably have to buy an annuity of up to 2/3 of final salary, and the ARF option is only available for AVC.

  56. @Gerard
    thanks – I was basing my estimate on a presentation we had a few years back when interest rates were higher and the annuity rate was 3% the cost then was 300,000, for a 10,000 with similar conditions. I am surprised it is up from then.
    The basic point though doesn’t change – it makes no sense to me to purchase an annuity at those rates

  57. Just like his supporters stateside caught on film encouraging voter fraud… and you know that for every one they catch there are probably 50 more…

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