Disenchantment with political and financial establishments has become a worldwide phenomenon and large sections of middle and lower-income workers believe their interests have been deliberately ignored. Recovering trust in a globalised economy where wealth gravitates upwards will not be easy. One way of reaching out to a disaffected electorate, however, would be by guaranteeing everyone a minimum living standard in retirement.
Pension schemes as presently structured are unsustainable, according to the OECD, arising from decades of government inaction. The State pension alone is failing to provide an adequate income in retirement.
Measures to limit tax breaks for the wealthy; impose strict controls on pension providers and address the remarkably generous treatment of senior public servants were regularly considered and normally avoided. Worse than that, these weak-kneed attitudes persist and were reflected in last week’s official pensions report.
That document was notable because of its limited vision. Rather than consider the pensions crisis as a unified whole, requiring radical systemic reform, it addressed a specific problem created by government action in 2010. At that time, the qualification age for a state pension was raised to 66 years while the mandatory retirement age in the private sector remained at 65. As a further cost-cutting measure, pension entitlement for this gap year was reduced. Retirement age is scheduled to rise to 68 years by 2028.
SIPTU general secretary Jack O Connor dismissed the report as "useless window dressing". It was an apt response. He called for legislative action to abolish the mandatory retirement age in the private sector while making special provision for long-serving workers in hazardous and heavy manual occupations. Such actions, however, would have limited impact on broader problems relating to financial affordability and social responsibility.
People are living longer in slowly deteriorating circumstances. If those who helped to build up this State are to be respected, they deserve an income in retirement that meets their basic needs. That is not happening at the moment. The state pension falls short and fewer that half of current employees pay into private schemes.
Individual responsibility for pensions is important and the OECD has suggested an auto-enrolment scheme for all workers. IBEC has proposed that, rather than abolish the universal social charge it should be used as a pensions fund. Neither proposal goes far enough. It costs €1.5 billion a year in tax breaks for private pensions; public service pensions cost €2.9 billion and a €7 billion bill arises for basic State pensions.
Those ratios will have to change. Redistributing wealth in an equitable fashion is a function of government. Ensuring all citizens have a basic living standard in retirement would represents positive social engineering and, with cross-party Dáil support, it can be done. It would justify “new politics”.