Bismarck, the Iron Chancellor set the German old age pension at 65. Ever since it’s been the standard retirement age. But the modern pension model is broken and both regulators and Government have failed to catch on. For starters people are living an awful lot longer, which coupled with very low long term bond income, has trebled the cost of buying a pension. Add that to a stock market that’s underperformed inflation for ten years and what you’ve got is an implosion. There simply isn’t enough money to pay out decent future pensions to workers and half the private work force has none

Sitting in the middle of a mess of rules that nobody understands are two regulators that report to different Ministries, The Pensions Board and IFRSA the financial regulator. The pensions industry itself is a dinosaur complete with lousy service and extremely high costs that eat into member’s money. Employers that have attempted to ape the gold standard, Public Sector pensions complete with guaranteed pensions linked to years of service, are horrified by the mounting black hole in their balance sheets as pension deficits hit their bottom line. Minister Linehan’s recent announcement that lets those retiring today delay buying a pension for two years is a sticky plaster on the titanic. There needs to be a radical rethink of the entire pension model that has to include;

• Resetting retirement to older ages like 70.
• Capping Public Sector pensions to the average wage and financing the rest from private schemes
• Introducing a mandatory minimum contribution or upping PRSI.
• Erasing the labyrinthine rules that feed industry costs and greatly simplifying it for everybody
• Amalgamating the regulators to save costs and remove confusion.
• Introduce State support to help pensioners buy a decent pension income to lessen the gamble
• Tackle the Industry costs head on, it’s far too chummy and uncompetitive.

Fresh thinking is needed and not the window dressing initiatives of yesteryear overseen by industry participants hell bent on keeping the goose laying the golden eggs in commissions and management charges. In recent weeks RTE Primetime ran an expose on the lousy advice routinely given to many public sector workers to forgo buying extra pensions directly from their State schemes in favour of taking out commission-based risky private pensions known as AVCs. The industry response has, invariably been hostile and condemnatory of RTE. Website discussion has been hijacked by vested interests, industry article writers are sharpening their pens and those who’ve highlighted the issues are being personally vilified. It sounds so wearingly familiar. Industry self –serving justification, vitriol and indignation followed a similar pattern when the mass selling of high risk endowment mortgages was first questioned in the early 90’s.

If the pensions industry can’t stomach independent scrutiny it is incapable of reform and the Government should look elsewhere for solutions. What’s needed is innovative new thinking ideally from a carefully selected task force of independent experts much like that set up to examine public sector efficiency.

Eddie’s Xmas Shopping Tips

Don’t shop half jarred. Write up a list. Stick firmly to it. Spend only cash you have in the bank. Check out on-line gifts. Switch to Kris Kringle for big families if you haven’t already. Think about gifts of time together like shared concert tickets, a dinner or a game of golf especially for parents. Shop alone, ditch the kids and wear light clothing to avoid overheating. Capture old fashioned Christmas joy and wonder by taking the kids to the crib or carol singing and away from the TV and toys. Enjoy yourself because January is shaping up to be a stinker.

The public deficit has widened sharply to €8 billion but the crucial issue is the trend. The tax trend is down. That’s why Minister for Finance Brian Linehan was on RTE’s Morning Ireland on December 3^rd. What we needed to hear was that lessons have been learned, that there is a plan to rescue the economy. What we got was a visionless performance that amounted to a defence of his classic civil service-led budget. There wasn’t the merest hint of fresh thinking just talk of imminent cuts

• Echoing Haughey’s infamous hypocrisy of January 1980, Linehan told us we were living beyond our means, that our standards of living had to fall. It was hard not to throw up. The Government preaches financial rectitude but does nothing to reform itself. Not a word about culling all the waste paid to his cohort of junior ministers, committee chairs, convenors, vice chairs and instant ministerial pensions.
• Asked about public sector pay increases, Linehan failed to grab the opportunity to set out stall. Pay needs cutting, plain and simple. Instead the Minister played politics. The recent pay increase doesn’t kick in until next year we were told. The hard targets, public sector union chiefs running Ireland’s most powerful cartel were grinning into their crunchy nuts. The soft targets will continue to get it in the neck, just like in the budget. Cowen’s flip flop in his dash back from Europe salving union concerns underscores the point.
• Where’s the economic stimulus he was asked. Here Linehan surpassed himself. Apparently we have one. It’s the infrastructure pipeline we were committed to completing anyway. Linehan, who is taking two billion out of the economy, wouldn’t know an economic stimulus if it stood up on its hind legs and barked at him. He criticised the British Government for lowering VAT. Doesn’t he get it? Lower taxes can mean higher tax revenues especially in a downturn. Higher tax on spending means more consumers stop optional spending altogether. The Minister should take a trip to Newry. It’s not just the exchange rate, Minister.
• There’s a worldwide economic downturn we were told. The subtext was clear; it’s not our fault. Despite everything that has happened, this Government still doesn’t get it. There’s a reason why our boom to deficit is one of the worst in the world, why our stock market is down on its knees, why some of our pensions schemes are insolvent. It’s called incompetence, a reckless stoking of the property bubble, a failure to restore Irish competitiveness because it meant facing up to vested interests and a focus on the cult of personality rather than policy.

Leadership is about knowing the way, showing the way and going the way. From yesterday’s performance by Linehan we can ascertain that this Government has no earthly idea about what to do. Workers already struggling with high living costs are losing their jobs, middle class wealth is being devastated, and there is a clear leadership vacuum. Still, Fianna Fail insiders will follow the doctrine of hanging together rather than hanging separately and will give guarded support to their leaders until June. The price for the delay in a leadership challenge will be a massive loss of seats in the local and European elections. At best a fresh economic plan will come a year too late despite the hammering private sector workers are taking. Expect the deficit to worsen by Spring and more of the same game of bluff from the Government.

Eddie’s Recession Tip

The European Central Bank is likely to lower interest rates faster and sharper than expected. That means next year cash could pay as little as 1%. Talk to your own bank and check out the competition. Now is the last chance to fix your cash deposit rates at 5% for longer periods like to December 09 with British nationalised bank Northern Rock.

Eddie isn't the most wiley man in Ireland as the 11890 ads suggest but he has given the parody his blessing. Each time you use the 11890 Directory enquiry service two things happen; firstly the children's charity, The Jack & Jill Foundation for whom Eddie acts is patron gets a contribution from 11890 which is a 100% Irish owned company and secondly you'll get a text reminder to get your old mobile phones off to The Jack & Jill Foundation, which is a mainstay of its funding. The Jack & Jill Foundation has an annual fund raising need of €2.5 million and operates a team of highly skilled pediatric nurses that provide respite support to over 240 Irish families that have infants and young children that require special care.