Pensions collapse
Over the past week there is much alarm and discussion on possible pension collapse but none of it has gone where pensions need to go if we are to save social harmony and even civilization itself. Pension Funds with astute investment thrived over the latter half of the 20th century but are entirely inadequate to provide 21st century retirement income and a new formula simply must be found urgently. The reason is never mentioned in discussion, reports and analysis of what is an enormous and increasing problem for a huge number of people. There is an aspect of the whole conundrum which affects pensions and practically all aspects of economics which no- one appears prepared to accept. But in modern economics it is very real and a “game- changer” for a lot of economic activity. Economic Growth as experienced through 200 years and more of Industrial Revolution is virtually dead. It is killed off by ability to produce practically everything ( goods and services alike) to gross oversupply making growth ( continual increase of production) unnecessary and impossible. Every eco- nomic activity associated with “growth” is seriously impacted with pensions very much in the front line. Through the latter half of the 20th century vibrant economic growth enabled pension funds to appreciate greatly year on year so that payouts were made from funds substantially greater than the contribution made. Some pension funds indeed, as vigorous economic growth continued appreciated even as they paid adequate and often generous income to beneficiaries. This is no longer possible as “growth” into the future is eliminated from the economic picture. Without “growth” pensions become a precarious and poor form of saving as administration expenses eat into stagnant funds with possibility of portion of or the whole fund being lost as inadvisable investments are made trying desperately to get some sort of sectional growth. It is interesting to note how Public Service Pensions come in for much critical comparison as the system used for payment of Public Pensions possibly holds the only viable alternative. Throughout most of history the young, the old, the disabled and the needy were cared for by the providers of the moment; those working to generate sufficient for the needs of the family or tribe or community. There was no special fund from which those incapable of contributing were fed or clothed or sheltered. It was all done from current availability; much as Public Service Pensions are paid from current funds at the moment. A semblance of that “current expenditure” is already included in private pensions as the private usually supplements a public “Contributory Pension” which is available to all with sufficient PRSI contribution. This “Contributory Pension” idea needs be expanded to cover sufficiency for everyone while all in employment make contributions not to their own private fund but to a communal kitty which pays all current pensions. Those paying will receive benefit when they retire which in turn will be paid by those employed at that future time. In the absence of growth for private pensions there is very little option other than Government operated currently financed retirement income if we are to avoid enormous hardship and poverty amongst the retired. Padraic Neary, Tubbercurry