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March 2006 Archives

Prescription for Pensions

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David Clerkin's piece on pensions (12th March) has highlighted inequities in public and private sector pension arrangements and in the role of the National Pension Reserve Fund.  Tax payers, predominantly in the private sector, are contributing over �2 billion a year in taxes to pensions. Unfortunately, this is not for their own pensions. About half their contributions go to pay "gold-plated" pensions of public servants and politicians, and the balance goes into the National Pension Reserve Fund. 

The following suggestions would put some fairness into national pension arrangements and help resolve the looming pensions crisis:

  1. The next round of benchmarking should take full account of the cost of public sector pensions. In addition, the public sector should progressively introduce self-funded schemes for all its employees.

  2. State organisations with pension deficits, amounting to a billion euro, should be required to sort these out internally and not be baled out by the taxpayer and by raising prices to consumers.

  3. The role of the National Pension Reserve Fund should be clarified as regards the expected distribution between public sector and social welfare pensions. This should take account of the fact that the vast bulk of the payments into the Fund effectively come from private sector workers notwithstanding that the main beneficiaries will be the public sector. Indeed, a fundamental reassessment of this organisation should be conducted on the grounds that the State effectively borrows over a billion euro year to invest in this Fund while it has a deficit in infrastructural funding which is being addressed via expensive and inefficient public-private partnerships.

  4. As TDs and Ministers are amongst the best paid and, probably, best pensioned in the world, they should fund their own pensions over and above a single basic scheme. The sums involved are not large but there is a principle involved and a lead should be given.

This prescription is likely to be painful but, as everyone knows, it is better to start pension planning earlier rather than later. So, before introducing mandatory pensions, the Government should create an equitable starting point.

Letter published in the Sunday Business Post on 19th March 2006.

On 7th March 2006, I made a submission to the Review Body on Higher Remuneration with a copy to Brian Cowan TD, Minister for Finance.

It urged that the Review Body should take account of and publish international comparisons when it devises new salary levels. Here is the submission . And, here is the Review Body Report which made virtually no effort to make any international comparisons.  

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