Irelands: Pensions timebomb ticks louder as more payments are put on hold
September 25, 2012 Irish Independent
On a day when most parts of Ireland were soaked in torrential downpours, it emerged that thousands of people have decided to give up on saving for a rainy day.
And in this case, the rainy day is life after work. The news that thousands of people have pressed pause on pension payments will hardly come as a shock. But it is a sign of turbulence ahead.
And the bad news on pensions has been building for a while now.
Just 772,000 people are members of a pension scheme, with less than half of those in the public sector. Another 200,000 self-employed people have a pension.
This is a pathetically small number, given that there are some 2.2 million people in the workforce.
But the concept of saving for retirement has been left reeling from a series of body blows.
The decrepit state of household finances means that a far-away event like retirement is shoved to one side as workers struggle to meet day-to-day bills.
This has resulted in one in five of those who have a pension deciding to either give up funding the scheme or radically cut back on their pension payments.
And previous Budgets have delivered cuts to the tax benefits for locking money away for retirement.
Tax reliefs are one of the few reasons at the moment for saving for life after work.
Further cuts here could be fatal to the idea of retirement planning. The Government has also foolishly and short-sightedly made putting money aside for a pension more difficult by imposing a levy of 0.6pc of the value of assets in private pensions with a view to raising €470m a year for four years.
Little wonder that eight out of 10 private sector defined-benefit schemes are in trouble.
New tough rules -- again coming from our pensions-unfriendly Government -- mean that many sponsors and trustees of schemes have given up the ghost and are winding up their schemes.
This will leave those who are yet to retire with far less than they could have expected from their schemes.
Even IBEC, a body representing employers, said recently it could no longer support the defined-benefit scheme it has for its own staff.
AIB and Arnotts are among companies turning their backs on defined-benefit schemes which promise two-thirds of the final income in retirement for those with full service.
And the publisher of this newspaper, Independent News and Media, is considering its options for its defined-benefit scheme.
And take into account that anyone retiring after 2028 will have to wait until they are 68 before they get the state pension.
The pressure is on for a cut in the state contributory pension, which is €230 a week for those who have made sufficient pay-related social insurance (PRSI) contributions.
All in all it means the lucky few who are now retired with a full state pension and either a public sector or private pension are the last to get these sweet deals.
Company — Ireland
Full nameThe Republic of Ireland