Sir, – The Editorial “a national pensions crisis” appeared on January 7th; it could have appeared on any January over the past five or 10 years. It is no exaggeration to say Ireland has already fallen off a “pension cliff”: public service pension obligations pose a huge risk to the exchequer and it is inconceivable that taxpayers can be asked to keep funding public sector pension deficits when their own pensions are in tatters or have yet to be started.
The founding fathers in Singapore started the Central Provident Fund, a mandatory individual pension saving scheme shortly after independence. Each employee pays a percentage of their salary (subject to a cap) into a retirement account and this contribution is matched by their employer. Crucially, it is the individual’s duty to save for retirement and the funds are owned by the individual.
The system is fair: employees of big and small businesses and the public service are treated the same. There is no bias in favour of “secure pensionable jobs”. Children are encouraged to support their parents’ accounts. In times of budget surplus, the government has topped-up citizens’ CPF accounts. Clearly, the CPF system was established by thoughtful and wise policy-makers.
Urgently, Ireland needs to start the painful transition to a funded pension scheme like the CPF. A part of every pay cheque should be saved for retirement, and employers (including the government) should contribute in cash. It will have to be phased in gradually over 30 years to cushion the impact on the exchequer and workers.
During the transition, however apparently unfair, public sector and well-off pensioners need to accept a reduction in benefits. In the interests of equity, serious consideration should be given to back-dating the reduction in pension benefits to the start of the financial crisis.
It is an inconvenient truth but the pension crisis is entirely home-made; bankers and bondholders are not to blame for this mess. Sadly and for certain, delay will only make this pension crisis worse. The current Government did not make this problem, but it must have the courage and determination to deal with it, once and for all time. – Yours, etc,