The new monkey in charge of the sub prime pensions department.
Thursday October 18 2007 Fianna Fails plan for solving it all!
PRSI contributions will not be enough to pay for welfare benefits in just three years time, and the system will then move into huge deficits, a new analysis by pensions experts has shown.The shock assessment of the Social Insurance Fund by consultants Mercer came as the Minister for Social and Family Affairs, Martin Cullen, described the whole pensions system as unsustainable.
He was speaking as the Government launched a major discussion paper on the pensions problem, but said it is not yet willing to commit to any changes.
In a sign of the pressures which are building as the population ages and people live longer, the Government is considering an assault on "Rolls Royce" public sector pensions for future government workers.
The Government will examine the fixed link between pensions and current public sector pay, as well as calculating pension on basis of career average earnings, rather than the final salary at retirement age.
It may have to act sooner on the PRSI problem, if more of the cost of benefits such as contributory pensions and jobseekers' allowances are not to fall on general taxation.
At present, the PRSI payments have built up a surplus of more than bn, but this will disappear by 2010, Mercer say.
This is because increases in pensions and other benefits have not been matched by higher contributions.
By 2016, the shortfall could be bn a year in today's money.
"The deteriorating financial position can be traced almost entirely to the increase in benefit under the long-term schemes," the report commissioned by the Government says. Mr Cullen pointed out that the Exchequer had covered shortfalls in the past, but acknowledged that the whole pension system must raise contributions and cut costs. "To do nothing would be disastrous," he said.
On public sector pensions, yesterday's discussion document says the Government is going to look at a number of options, including raising the public service retirement age and making workers pay higher pension contributions.
The reforms will only apply though to future appointees to the public service, as any changes for existing ones would be bitterly opposed by public sector unions.
Several sources in public sector unions said last night that the document would have to be studied in detail before issuing a response. In general, the demographic and budgetary realities "pose excessive future risk to the Exchequer", the Green Paper on Pensions says.
It is calculated that, by 2060, the average life expectancy for men will be 87 years, and for women 91 years.
The Government hopes to reach a consensus on new policies by the end of next year. In the meantime it is not favouring any options, including a SSIA-style matching contribution for each saved in a scheme.
"The best way of achieving a sustainable and fair framework is to ensure diverse voices are heard and to build further on the social partnership approach," Taoiseach Bertie Ahern said at the launch of the document.(Whatever that means?)
(Prize waffle-youll be dead Bertie (with luck) when the post offices run out of cash!
Fine Gael Social and Family Affairs Spokesperson, Olwyn Enright TD described the Green Paper as constituting Ë| pages of nothing."
"It did not contain one single concrete proposal on how the Government will tackle the looming pensions crisis.
"This doesn't move the debate on one iota since the Pensions Board Recommendations in 2006, with the Green Paper full of options and no decisions."
Age Action said it is particularly concerned that adequate pension provision be made for current pensioners.
"Half of all pensioners are currently completely dependent on the State for their retirement income. That figures rises to 60pc for those living alone," it said.
Fact is they dont have a plan
Tuesday August 01 2006
COUNCILLORS are set for an early Christmas present And some will get over 5,000 Euros more, arising from changes by Environment Minister Dick Roche.
Mr Roche is also dramatically increasing the golden handshake paid to retiring councillors to twice the average industrial wage for those with 20 years' service.
The multi-million package will significantly increase the money pie carved up by councillors last year. The increased allowances were put together after intense lobbying from Fianna Fail senators, who are mainly elected by councillors
The vast majority of the funds come from the 34 county and city councils across the country.
But this study also includes payments from eight regional authorities, two regional assemblies, eight fisheries boards, 14 colleges and six VECs.
Councillors get paid a variety of wages, allowances and expenses from a complex system.
Here is the rough guide through the cash maze.
* County and City Councils:
- Representational Payment: Every councillor in the country starts off with a salary type payment of more than €15,000.
Known as a 'Representational Payment', it was introduced in 2002.
- Annual Allowance: This payment is to cover expenses for attending meetings associated with council business as well as postage and telephone bills and is usually worth around €5,000.
- Positional Allowances: The Mayor and Deputy Mayor, or chairman and vice-chairman, get an additional annual allowance. The amount ranges up to €30,000 for the Mayor, depending on the local authority. Councillors who are chairs of Strategic Policy Committees (SPC) get a tax-free allowance of €5,078. Usually there are five SPC chairs.
- Expenses: This is where it gets really interesting. Councillors get ad hoc travel and subsistence payments for going to conferences, foreign trips, training courses and some meetings.
* Regional Authorities and Assemblies:
Each region in the country has its own regional authority, usually covering three or four counties.
Each council in that region has about five or six councillors who are members of the authority and get allowances and expenses.
The 235 councillors on regional authorities last year got paid an average of €2,885 each.
From this pool of councillors, members of the two regional assemblies in the country are drawn, who also get allowances and expenses.
* Fisheries Boards: Not a highly lucrative source of funding as there are only seven councillors on the country's eight fisheries boards. But one of them did get paid €3,500.
* Colleges: Most third-level colleges have councillors on their governing bodies - either as representatives of the council, the VEC or as Ministerial appointees. The payments vary from zero upwards but one councillor did get paid €25,000 last year.
* VECs: Every council has several members on the local Vocational Education Committee and councillors get paid allowances and expenses.
- Fionnan Sheahan
JUNIOR Minister Frank Fahey is atypical of the next generation of Fianna Fail rulers,the second ranks of the Soldiers of Destiny-unfortunately, yours and my destiny.
They are sometimes former teachers ,often part time publicans , farmers, hoteliers,auctioneers, and ambitious speculators who are invariably busier minding their own business empires than attending to the worries and needs of the majority of the people who put them in a powerful (and lucrative) post from where they can enact legislation nilly willy so that they can protect their wealth from the kind of taxation which ordinary salaried citizens are subject to.
Frank,according to newspaper reports in April 2006 had not declared an interest in a $1m-valued US property on the Dail register of interests.
The property (equivalent to .83m) is held by a US company in which he is a shareholder.
Mr Fahey has declared interests in other properties held by the same company.
An Irish Independent inquiry has found the Junior Justice Minister has amassed a multi-million euro property empire across the globe in either his own name or in partnership with relatives or business associates.
Many of his 20-plus properties were purchased in the US, Europe and Ireland with his wife and a company called Sage Developments.
But the former teacher-turned-politician has not declared his interest in a m six-bedroom house in Massachusetts on the Dail register of interests.
This property, which is situated on Perthshire Road, is registered to Fahey Higgins LLC, a Boston-based property company in which the Galway TD is a shareholder.
His declaration of interests confirms he is a shareholder in the company. But despite this the minister has denied he has any interest in the valuable real estate property.
"I don't have any interest in Perthshire Road," he told the Irish Independent.
Mr Fahey's declaration of interests for 2005 reveals his vast property portfolio which includes interests in 20 property projects in Ireland and seven more abroad. This declaration states that he is a shareholder in Fahey Higgins LLC.
He declares an interest via this company in a property at Strathmore Road and a second on Tappan Street in Boston in his register of interests.
US records show that the Perthshire property was acquired in February 2004 by the company for $1m using a mortgage of $900,000.
Mr Fahey stated that despite his shareholding in Fahey Higgins he was fully compliant with the Ethics in Public Office Acts governing members' interests as he had no financial dealings with Perthshire Road.
"My only reason for being a shareholder in Fahey Higgins LLC was to facilitate a relative borrowing money from US banks," he said.
The other shareholder in Fahey Higgins is his only daughter, who lives in America, and Frank Higgins.
Mr Fahey said he received no payment from any transaction involving Fahey Higgins LLC.
He said this included a recent deal in which the company sold two apartments at Strathmore Road for $1.4m.
These transactions took place at the end of 2004 and in the first quarter of 2005. Fahey Higgins LLC continues to own one apartment in the complex on the up-market street.
This is the second time he has been involved in confusion over property interests abroad.
In 2000 it emerged that Mr Fahey's name was on the title deeds of a property in Daytona Beach, Florida.
He explained at the time that although his name may have been on the deeds along with a friend called John Cahill he had no beneficial interest in it.
He had merely acted as a guarantor on the mortgage to satisfy a bank. But despite this he included the property on his declared register of interests in 2001.
In parallel with his political career Mr Fahey has amassed a vast portfolio of property interests in Ireland, France, Belgium, Portugal and the US either in his own name or in partnership with relatives or business associates.
His declaration of property interests in 2005 include ownership or shareholdings in 10 apartments and six houses around the country as well as shops and development land.
Mr Fahey declined to discuss his various business partners or for how much he had acquired individual properties when contacted by the Irish Independent.
He said his property dealings were "a private matter" and he was not obliged to comment.
"I was once in the company of a junior minister who was asked when a committee he had established was going to reach a decision on a particularly thorny issue. The minister guffawed with laughter and said: “I thought it was my job to make no decision for as long as possible.”
Despite the fanfare around the launch of the government’s green paper on pensions, I am suspicious that the “dialogue” which it purports to open is nothing more than another delaying tactic. Delaying what, I wonder?
A report from the National Pension Review was submitted two years ago to the then minister for social welfare, making several detailed recommendations which presumably will be implemented. So if the “dialogue” has already taken place, what are we supposed to be discussing? I smell “consensus building” for mandatory pensions.
Brian Cowen, the finance minister, insists that there are many possible “difficult options” which must be discussed “openly and honestly”. But I suspect this is really a softening-up exercise to force me into buying a product I do not want.
I’m one of the 50% of the Irish workforce without a pension, and I have no plans to get one. I take this position for two reasons. First, because of a mortgage and childcare, I can’t afford to do without another large chunk of my income. Second, whatever I can afford to save I am not giving to already overpaid, crystal ball-gazing executives who are having a ball with billions of euros from their customers’ pension funds.
This doesn’t mean that I’m not making provision for my old age. I put money in a savings account, I’ve bought some shares which are coping well despite the current upset in the markets. I intend to invest in property and I’ll eventually own my house. Throw in the free bus pass, the medical card and the fact that I intend to work until I drop, and I think I’ll be fine.
The worse case scenario is that I might not turn into one of those perpetually holidaying “actively retired” consumers in the pension ads. I think I’ll cope without a tan or capped teeth. I want to pay for my retirement without buying the financial product known as a pension. They cost too much and come with so many restrictions that their benefits are limited.
Though the government and salesmen sing the same tune, some experts in the pensions area back up my suspicions. One is Albert Dawson who has been an insurance broker for over 40 years. He has calculated that any tax savings made from contributing to a Personal Retirement Savings Account (PRSA) are wiped out by the commissions paid. The fees relating to PRSAs were capped, in order to attract more takers, but they still amount to 5% at entry and 1% of your whole fund – not just the contributions – annually.
When the fund matures you can’t just cash in and run off to Bermuda. Regulations stipulate that you take only 25% as a lump sum and the rest must be used to buy an annuity, or yearly income, which is subject to tax. That’s when the real party starts for the fund managers. From then on they get a yearly commission for looking after your pension fund.
Half the workforce share my reservations, and the state will have to figure out what do with us because the “difficult option” of buying a pension isn’t going to run. Anway, I thought by paying tax I was paying into the Old Age Pension. Where’s that money going? I have a suspicion - but I’ll get to that in a minute.
The two loudest participants in the “debate” so far are the government and the pensions industry. Well, you can see which way the industry will go: more pensions. More commissions for us, and all subsidised by the state. At least we can’t accuse them of having a hidden agenda.
Ministers and civil servants are quite happy to lecture us, but you won’t catch them investing in a pension. When they refer to the pensions “time bomb” they forget that they detonated a pretty large bomb themselves when they negotiated public sector pensions. Because when a public servant retires, his pension is based on final salary, and is linked both to inflation and the ongoing salary of the grade at which they retired.
“Open and honest” didn’t feature when the benchmarking authority granted significant pay increases to the public sector, which meant everyone on a public sector pension got a 9% rise too. The cost comes directly from current government expenditure. That’s where your tax euros are going: not for your OAP, for theirs.
These pensions are so valuable that the Central Statistics Office has calculated that a public-sector salary is worth 45% more than a private-sector one. A private sector employee would have to put aside 28% of their income for 40 years to build a pension that would match a public sector one. The public service pension bill is projected to rise from 1.3% to 4% of GNP by 2040-2050. But can you see the “debate” concluding that the first “difficult option” will be doing something about that? Or will they just get straight to the bit where I’m forced to sign up with Irish Life or Eagle Star?
Benchmarking should, of course, be abolished. Public servants’ compensation for being paid less than the private sector was a good pension. So they should be getting sub-private sector wages. Instead, due to benchmarking, they’re actually earning more.
There must be no mandatory pensions and no mandatory retirement age for the rest of us. If I’m fit and healthy at 65 and want to keep working, why shouldn’t I? I don’t want to be told when I’ve a good 20 years left in me that I’m no use to anyone. Retirement should be a choice. If you want it, take it. If you don’t, see you Monday.
So forget about tax write-offs for pension payments. The state is simply subsidising the pensions industry even though ordinary workers have rejected their bad products. What we did like was the SSIA system. I put in four euro, the government chips in one, and not a penny goes to fund managers. That transparently puts money into our pockets and subsidises me instead of an insurance company.
While I await the result of the green paper “dialogue”, I think I’ll apply for a public sector job. Maybe I’d like a tan after all."
Oct 2007: BECAUSE of escalating costs the pension of a single teacher could cost the State up to €1m.
The civil servant pensions bill is set to increase by a staggering 75 per cent over the next 10 years.
In 2005, the entire public sector pensions' bill came to €1.4bn. But by 2015, even before inflation or a single extra public sector worker is factored in, this will have risen to €2.4bn.
According to Mark Fielding of the Irish Small and Medium Enterprises Association (Isme) the country is now facing a "public service pensions' tsunami".
When the rest of the public sector workers in Education, Health, Justice and Defence, who all enjoy similar pensions, are factored in, over €1bn extra a year will have to be found.
Isme believes that "we are facing an escalating public sector pension black hole where the cost of a single primary school teacher is €1m."
Brian Cowen has claimed the National Pensions Reserve Fund will deal with this issue.
To date, the fund, which requires the payment of 1 per cent annually of GDP, has reached €18.8bn. However, Isme believes we are rapidly reaching a scenario where "the fund will barely keep pace with the requirements of public sector pensions".
Speaking to the Sunday Independent Isme's Mark Fielding noted that when the pension fund was originally established "the government claimed 66 per cent of it would go to all workers and 33 per cent to the public sector".
However, since then, there has been a "U-turn where the divide is now 50/50". The director noted these figures indicated there was an urgent need to reform the "basis of public sector pensions which is based on an act of 1832". Fielding also accused politicians of failing to factor in the pension implications of "the thousands of new gardai, nurses and consultants they are promising into their budgetary calculations".
He noted that seeing as every €1 spent on bench-marking or new employees contains "a hidden 25 per cent pension surcharge" this was an irresponsible attitude that would have incalculable consequences for future generations.