The Government plans to enlarge the pension’s ghetto. Outside are the public sector pension rights valued at between 15 and 20 times final pay at retirement and amounting to over €100,000,000,000 in locked-in future income guarantees - and inside the rest of us poor mugs who, despite the pensions levy, are paying for vast majority of it. In the latest attempt at reform, this one by Mary Hanafin, the outcome will be further farce, complexity and inequality;

• Self Employed workers are to be shafted, paying income tax and levies well over 50% but getting relief on pension investment at just 33% and then paying over 50% on pensions at the other end.
• Tax free cash lump sums are to be capped at €200,000 in a move that will hammer any self employed worker who has the audacity to have a pension fund worth a little less than a teacher’s. Meanwhile this rule cannot hit lump sums for any retiring public sector worker earning less than €133,000- that’s over double a teacher’s pay. Guess who made up the rules!
• Workers who can’t afford pensions are to be forced to save with the enticement of tax relief robbed from higher rate taxpayers but allowing them to opt out.
• Nothing is being done to equalise the amount of money being spent across both private and public pensions – the rules are being written outside the ghetto.

Just like the introduction of PRSAs some years ago, the fanfare cannot hide the truth. This initiative is doomed from the start. Self employed workers can easily defeat the Government’s theft of their pension power by mimicking employer pensions through incorporation - having the limited company make the contributions rather than themselves.

This is typical stupidity from pension planners and adds more complicated trickery to a labyrinthine market bulging with unnecessarily high charges because successive Governments have abysmally failed to simply and reform. If any Irish government has the bottle to radically address this most unequal feature of modern working life then the route to take is the introduction of a universal pension benefit to which all workers contribute evenly. That means;

• Setting a big bang date that scraps public and private sector pensions, capping existing benefits at what’s already been earned to that point.
• Introducing a decent flat pension benefit in the range €35,000 to €50,000 financed by worker and state contributions and boosted by transfers in from existing private schemes.
• Guaranteeing pensions for all but allowing some flexibility for extreme events like a collapse in asset values
• Centralised administration and fund management that stresses lower costs and simplicity

Course that means telling high rollers both in the public and private sector that, once the universal benefit has been reached, they are on their own. But it would go a long way to address the unfairness where lower paid and risk taking private sector workers are subsidising higher paid public sector workers to the grave.

PS   Public sector workers mis-sold AVC’s that have hardly held with inflation for ten years should use their stash to buy higher benefits directly from their main schemes before these loopholes are closed off.

PPS   With over a trillion dollars in US deeply discounted mortgages (known as ARMs) about to reset over the next two years a further wave in the banking crisis can’t be ruled out. That’s why I still favour demand over fixed deposit accounts. The Irish subsidiary of the UK Nationwide Building Society and where you’re protected up to the first £50k or c.€55k is quoting best rate at 3.3%. The minimum is two grand.