An Irish woman's social, political and domestic commentary
Sunday, October 23, 2005
ST - Pensions
I don’t have a private pension and I haven’t the slightest intention of taking one out.
My finances are tight enough as it is. With a growing family and a mortgage, my daily expenditure is at its peak. Why should I divert funds from our budget so that executives in Irish Life or Eagle Star can pocket big commissions and drive fancy cars? You’ll have noticed that none of these companies guarantee a specific return. Instead those speedily announced qualifications at the end of ads tell you that stock markets go down as well as up and really, well, it’s a roll of the dice what they decide to give you in 30 years’ time.
I plan to work until I am physically incapable. At the official age of retirement, I’ll own my house. So I’ll flog it, buy a smaller place and make sure not to fall out with my children. That’s my pension.
In addition, my husband and I have made a pact that we will die in a nice clean fashion and avoid any lingering conditions requiring expensive medical treatment. Should I be widowed early, I am quite confident a well-off gentleman will take me under his wing.
As you can see, I’m not buying into the pension crisis. And I object strongly to the insidious way the social contract is being renegotiated. I object even more strongly to the insistence that an individual’s worth be measured solely in terms of their economic activity, through either production or consumption.
The old deal was simple. You worked hard all your life and paid your taxes. You retired at 65 at a time when 65 was old and people were physically worn out. Having performed your role as a productive citizen, the state paid you back some of your taxes before you kicked the bucket at 70. The citizen looked after the state, and in return, the state looked after the citizens when they couldn’t look after themselves anymore. The government was quite happy since they had to give far less than they received.
But the state isn’t happy anymore. Despite the best efforts of the shambolic health system in this country, people insist on living longer. And now all the bean counters can see are useless old codgers draining money for their hip replacements from the IT budget. Something must be done, they cry.
So something is being done — a sustained campaign to persuade us that we should not expect anyone else to look after us when we get old. This national exercise in expectation management is reaching hysterical proportions. Politicians make grim speeches describing a country filled with tattered coats upon sticks who will take, take, take from the exchequer until there is nothing left. Business journalists are wined and dined at seminars held by government-funded think tanks to hammer home the message: nobody else will be willing or able to mind us; we must do so ourselves.
The pension companies bombard radio, television, billboards and newspapers with ad after ad to create a sustained image of old people on holidays (good) or old people sitting at home being poor (bad). The goal is to convert money-grabbing oldies into golf-playing consumers who add to economic growth instead of reducing it.
This scenario ignores many realities. The first is the insistence that, when you get to a certain age, your desire to be productive will cease. People need a reason to get out of bed in the morning. The biggest motivating factor to do so is that someone needs you to perform a valuable task.
There are many inspirational characters that will keep doing paid work despite the orthodox insistence that they are beyond the age of use. Garret FitzGerald, who will be 80 next year, is a brilliant example. If somebody told him he couldn’t work anymore, he’d probably curl up and die in a week. My granny taught piano until she was 89. People kept throwing retirement parties for her and making collections for presents, but she refused to take the hint.
Apart from a normal job, there are many possibilities for the so-called retired. Both my parents are officially beyond the age of retirement and they barely have time to talk to me. Halfway through phone conversations my mother has to hang up abruptly when she realises she’s late for a meeting connected with many of her community activities. The usual sight I have of my father is the back of his car zooming off to a political engagement.
Their siblings and relations are the same. In fact, all the officially old people I know are looking after grandchildren or involved in community projects and voluntary work, which enriches life for everybody. They’ve all found some channel through which the skills and knowledge accumulated in their lives can be put to productive use.
In that light, the state pensions to which they are entitled should not be seen as a luxury that in time will become unaffordable. Instead we should see it as a wage to a huge section of the population whose industrious nature brings tangible if, strictly speaking, economically unimportant benefits to the rest of us.
Perhaps my personal philosophy is foolish, but I have an ace up my sleeve: the government reminds us that the future is a land with an ever-decreasing population of workers who will refuse to fund state pensions for the increasing population of oldies. Don’t they know how democracy works? Everyone keeps telling us there will be loads of old people in the country. That’s old votes. So we’ll just vote into power those politicians who agree to increase state pensions.
They might have to cut back on computers and state dinners. They might have to raise corporation tax. But when I’m leader of the OPP (Old People’s Party) and holding the balance of power, I’m sure they will see the sense in this. So bring on old age. I can hardly wait. posted by Sarah | 19:24 14 comments
As a private pension holder, reading your article made me feel quite bitter. Will it mean in the future that those of us stupid enough to have paid into a pension will have to take a hit to support those who didn't bother? Because a pension didn't fit in with their Celtic Tiger lifestyle?
My father's friend recently retired. He didn't have a private pension. The state one that he has started to receive amounts to €300 in total per week for himself and his wife.
€300 per week. Do you think that it is too little, just about sufficient, too much? You don't make it very clear, Mr Private-Pension-Holder.
Well, I must say that I don't have a "celtic tiger lifestyle". We have one car, we eat out very rarely, I cook economical and nutritous meals like stews, we haven't been skiing in years, we don't take mini-breaks in exclusive spas in the west of Ireland and I have no intention of hiring professional entertainers for my kiddies' birthdays.
What I really resent is the insistence by the state that care for the elderly is not their responsibility. Its the whole PD notion of personal responsibility. Your circumstances are your problem and no one else's. If you are born poor, don't expect the state to even things out with family supports and decent education. If you die poor, don't expect the state to give you a bed in a nursing home.
If someone works for 30 years and pays their taxes they are entitled to get something back for it at the end of their lives.
And those pension companies DON'T tell you what you'll get. What's to stop them announcing in 20 years that things are a bit rough and they can't give you as much as you wanted? Sure they could give €300 a month and what could you do about it?
Anyway, as I stated in the article, what I really expect to be doing is working away and sponging off my kids. I don't think anyone needs to feel bitter about that.
I'm not sure you understand personal pensions. It's your money. The company managing your investment can't "decide" to give you less any more than your bank can "decide" to give you less than the money you have saved in a bank account. Of course you might get less because your investment doesn't do very well, but that's a different kettle of fish.
the personal pensions industry is based on the idea that you might like to supplement the old age pension in order to have a comfortable retirement. it is also a sensible way to spread your income across your life in order to minimise the tax you pay. that's all there is to it.
I don't think anyone is suggesting getting rid of the pension, although (based on reasoning similar to your own) they will probably make you work (or sign on) longer for it.
Hi Tom. I admit that I don't have a deep understanding but I did know that it was your own money. BUT what they are supposed to do is invest the money and give you back more than you put in. What if they say, actually, we invested that money and we made a balls of it and now there is just your capital left (minus fees). In which case you would have been better off leaving the money in a normal deposit account.
Of course this may not happen. But it could happen. I'd rather take my own risk and spend the money on property or invest it myself instead of letting a bunch of wankers in pinstripes get rich on my money.
300 euro a week? Isn't that about the same as the average industrial wage in Ireland, after tax? At that rate, many working people's incomes will go UP when they retire with no pension.
Your pension contributions can be written off against tax, if you never make any gain on your capital you will have almost twice as much dosh as if you put it in a deposit account (if your on the higher rate of tax). the SSIA scheme pales in comparison.
ok ok I acknowledge that my instinctive prejudices against big financial institutions has warped my views on pensions BUT I still maintain:
1. I don't have the cash to hand over now for a pension
2. I think property is an equally valid pension
3. I think the government will have to keep increasing pensions to keep old voters happy
4. I'd like to think I'll be like Garret and keep writing into my old age. In fact, I think it will be easier than it is now because I won't have kids screaming at me every 2 minutes.
You can ask your pension manager to only invest in cash or government bonds if you want, then you have no risk and just get the tax benefits.
Certainly a lot less risky than investing in property right now.
Sarah- You are right on point 3 and 4 but not on 1 and 2. If you do not have the money to invest in a pension you would nothave the money to invest in property.
Creating your own pension by investing in property alone is foolish. Pension funds allow you to spread risk (albeit funding the pin stripe bridgade in the process)
leave the bean counters alone! - Eamon
If pensions were a good idea they wouldn't need all the tax breaks. It isn't a nascent industry kill the tax breaks.
Hello Eamon, On property vs pensions. The thing is tho' it's actually quite cheap to get the money for property. If I buy to invest (which I haven't done - this is all theoretical) once I get the deposit together, financial insitutions will lend me the rest at pathetically low interest rates. This is much better than draining money out of the wage cheque every month. I agree that there is a risk issue, but property never actually has gone down in value (in Ireland). The only people who get caught in all that negative equity shit are the people who HAVE to sell at a particular time. Anyone who can hang on is ok. An awful lot of people are taking this gamble and buying a flat in Dublin with borrowed money, bank on renting it out and giving it to the kids for college and then sell it. They might be wrong, but a lot of people are doing it.
In spirit I agree with Sarah, I hate all the pensions panic and those who make money on it. But, regarding property - I do believe that it is possible to create a pension fund from your gross income which goes into a property - and the income from renting the property goes into the pension pot also. There are Revcom rules about being hands off the property yourself - i.e. not living in it or holiday home etc. That would seem better that buying the property out of your nett money after tax. Any thoughts anyone?
"This is much better than draining money out of the wage cheque every month"Post a Comment
look at the price of an apartment in Dublin on myhome, find out how much rent you will get by taking a look on Daft, and then do the maths.
it costs a lot of money to 'invest' in property at the moment. never mind the potential hassle and costs associated with being a landlord.