60% of Irish private workers have no jobs pension
60% of Irish private workers have no jobs pension while there is a 100% coverage and special pension provisions for politicians, and 100% coverage for public sector workers. Last year pension payments rose for former politicians and it's not surprising that the poor pension coverage is not a priority.
Irish private sector spending on pensions is among the lowest in Europe according to the Organisation for Economic Cooperation and Development (OECD) and total pension spending as a ratio of 6.1% of gross domestic product (GDP) in 2011 is at the lowest in the European Union and almost half the ratios in the Netherlands and Germany — business spending on pensions in the Netherlands is seven times the ratio in Ireland.
A change in the low coverage in the private sector is dependent on people who have no fears of being short of money when retired — politicians, senior civil servants, permanent journalists in the main media outlets, and three members of the Pensions Authority, including David Begg, the former trade unionist and central banker, who was recently appointed chairperson.
Finfacts, 11 February, 2016: In record year Swedish multinational closes Irish pension scheme
Joan Burton, tánaiste, minister for social protection, and leader of the Labour Party, is entitled to 2 public pensions and her husband has a public pension as a former lecturer.
Burton has been the top pensions policymaker since early 2011 and in 5 years she has performed the typical role of Irish ministers: she commissioned the OECD to produce a report and after 3 years in office, in March 2014, she established an advisory group, the Pension Council and in February 2015, she established a Universal Retirement Savings Group (URSG) to advise on how reforms should be implemented.
The URSG includes an "expert in international pension reform" and an "expert from a country that has implemented similar reforms."
The Programme for Government 2011 – 2016 contained a commitment, to “reform the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers,” while the Statement of Government Priorities 2014 – 2016, confirmed that during 2015, “the Government will agree a roadmap and timeline for the introduction of a new, universal supplementary pension saving scheme.”
Burton's record is 5 years of failure in an area that is not a priority for her — reports, advisory groups and a record of failure.
In Ireland the full state pension requires 43 years of contributions and at €233.30 per week is about 34% of average weekly earnings. Next April the UK system will be simplified with a basic state pension of at least £148 (€195 a week) which is about 23% of average 2013 earnings. Claimants will require a 35 year record of national insurance contributions, or credits, to qualify for the full payout.
The average Irish annual gross earner of €36,000 without an occupational pension would receive a net pension of 42% of net earnings compared with 38% of net earnings in the UK; 45% in the US; 50% in Germany; 80% in Italy; 68% in France; 96% in the Netherlands; 92% in Austria; 66% in Denmark and 64% in Sweden.
This data is from the OECD's 'Pensions at a Glance 2015' report and is based on a worker aged 20 in 2014 who continues working until state pension age in each country, under their current national pension rules. The 'net replacement rate' represents the ratio of net state pension entitlement to lifetime average net earnings.
Mandatory private pensions exist in 12 countries. Private pensions that have near- universal coverage are described as “quasi-mandatory” (Denmark, the Netherlands and Sweden).
Italy spent the largest proportion of national income on public pensions among OECD countries in 2011: 15.8% of GDP. Other countries with high gross public pension spending are also found in continental Europe, with Austria, France, Greece and Portugal at about 13% to 14% of GDP and Germany, Poland and Slovenia at about 11%. Public pensions generally account for between 23% and 30% of total public expenditure in these countries. Spending tends to be low in countries with favourable demographics, such as Australia, Canada, Ireland (5.3% of GDP) and New Zealand.
The OECD says that the biggest flow of private-pension payments is in the Netherlands: 5.8% of GDP in 2011. Added to public spending, total benefits are 11.2% of GDP. Switzerland has the next highest figure for private-pension benefits: 5.0% of GDP. Swiss occupational plans are compulsory, although the data on private-pension payments include benefits above the statutory minimum level. The next five countries — Canada, Denmark, Iceland, the United Kingdom and the United States — record private pension payments of between 3.3% and 4.7% of GDP.
Ireland's business spending on pensions was at 0.9% of GDP in 1990; 0.8% in 2000 and 0.8% in 2011. The UK business ratio was 4.6% in 2011 and the US ratio was 4.5%.
In 2006 Brian Cowen (b. 1960), then minister of finance, (who had a €2000 rise in his pension to €134,000 in 2015), had his representative on the then state Pensions Board veto moves to support a mandatory pension system.
Irish business pays the lowest corporate tax rate in Western Europe and the employer social security costs are also among the lowest.
A mandatory enrollment system without an obligation on the business sector to contribute a reasonable share, will not work.
The OECD reported in its Employment Outlook 2015 that the percentage of the Irish workforce on low pay — defined as the share of workers earning less than two-thirds of median earnings — at 23.3% in 2013 was the second highest after the US level of 25%, among the 34 member countries (27 are developed countries). Belgium was at 6.0% and New Zealand was at 13.7%.
The high level of low pay in the Irish economy distorts the level of relative poverty of pensioners as prior to pension age, some of the workers are poor.
The Department of Social Protection says:
Life expectancy is increasing. In the mid-1990s, life expectancy for males was 73 and for females, 78.5. For those aged 65 today life expectancy for males is 82 years for men and 85 for women, by 2030 this will have risen to 84.1 and 87.4 respectively;
There are approximately 17,000 additional pensioners coming into receipt of State pension each year;
The over 65 year old population is projected to increase from 11% of the total population in 2010 to 15% in 2020 and to 24% in 2060;
There are currently 5.3 people of working age for every pensioner and this ratio is expected to decrease to approximately 2.1 to 1 by 2060.
In 2012 PricewaterhouseCoopers (PwC) submitted a report on pension fees to Joan Burton, which she had commissioned. It cited:
Individual pension charges are expensive: An individual with a final pension fund of 400,000 could lose up to 30% or €120,000 in charges;
Occupational pension charges can be reasonable, but many schemes are paying more: A person in a defined contribution scheme with a final pension fund of 400,000 could lose up to 15% or €60,000 in charges:
The report shows that apparently small percentages can add up to big reductions in a pension fund over time:
For example, if an individual age 35 saves €250 per month for a pension for 30 years, a fund of approximately €200,000 is created which results in a pension of about €10,000 per annum. Apply the average charge of 2.18% per annum to this fund and the final fund is reduced by 31% i.e. the fund is reduced by €62,000, resulting in a lower pension of €6,900 per annum. This impact would be significantly higher where the maximum charges apply.
In 2013 Burton threatened a crackdown on excessive fees — it is in process!!
Chart on top from the OECD's 'Pensions at a Glance 2015' report.