Inside the world of business
Nothing new in dire warnings on Social Insurance Fund
“THE DETERIORATING financial position of the [Social Insurance] Fund can be traced almost entirely to the increase in benefit outgo under the long-term schemes . . . It is clear from the chart that, except for the scenario where benefits are uprated in line with prices, contribution rates would have to increase substantially if the Fund’s income is to be adequate to support the benefit outgo . . . ”
Dire warnings indeed, and very much in line with the tone from the leaked actuarial review of the Social Insurance Fund by KPMG on which we reported yesterday.
Except this excerpt doesn’t come from that report. It comes from the previous actuarial review of the fund carried out five years previously at the end of 2005.
If anything that report, written by benefits consultants Mercer for the Department of Social Protection – then Social and Family Affairs over which Martin Cullen presided as minister – was even more chilling in its projections. In the midst of the Celtic Tiger, the fund was at that time in surplus but, even though Mercer forecast that it would remain in the black till 2016, it projected a net contingent liability of €331 billion by 2061 – the end date of its 55-year review.
Five years on, in the worst recession of a generation and with the likelihood of a sustained period of low growth, KPMG sees the out-turn as being €7 billion better.
It is also more optimistic in relative terms on demographics in the population. Even with the proposed increase in retirement age, KPMG estimates that, by 2066, there will be just 2.1 people working to support every person over the age of 65 compared to 5.3 now. The Mercer equivalent five years ago suggested the support ratio by 2061 would be just 1.8 from 5.6 in 2006.
What is singularly depressing is that, during those tiger years, nothing was done to improve the long-term financial health of the fund.
Five years on, as we fret over the most recent projections, does anyone think that ministers who have made a virtue of watering down troika austerity plans have any real appetite for implementing the structural changes required?
Thriving Tullow solid as a rock
A BENCHMARKING exercise recently spurred exploration group Tullow into giving double-digit pay increases to key staff in Ireland, Britain and around the world.
The main beneficiaries worked in its geosciences and geophysics departments. Staff with such skills are critical to all exploration companies, as they are central to identying which rock formations could potentially contain oil and gas, and where they may be found.
Tullow’s motto, “geology over geography”, and its strategy of focusing on regions that share similar sets of geological characteristics to areas where it has been successful before, mean it values these staff particularly highly.
And these staff are doing something right: in the first six months of the year, Tullow found oil or gas in 17 of the 22 exploration wells it drilled, a hit rate of 77 per cent, meaning it is particularly good at finding hydrocarbons.
Its benchmarking exercise took into account that it has operations around the world, and has become a big player in global exploration terms. It is also producing large quanities of oil, thanks to its Jubilee Field asset off the coast of Ghana.
The fact that the exercise arrived at a double-digit increase for specialist staff is indicative of something else. Strong oil prices are helping to drive an expansion in exploration activity, which means increased demand for geoscientists and geophysicists.
Whatever is driving it, it’s good news for people working in those specialisations in its Irish hub at Leopardstown in Dublin. In May the group announced that it was creating 30 new jobs there, many of them in these critical areas.
Club Orange’s breast bits fall foul of advertising authority
THE STANDOUT line of the Advertising Standards Authority of Ireland’s latest complaint bulletin goes like this: “The advertisement had used sexual innuendo merely to attract attention as there was no tangible link between a pair of women’s breasts and the brand of Club Orange.”
Now glossing aside the clunky use of the phrase “a pair of women’s breasts”, the authority’s position was clear. The Club Orange billboard advert, which showed two large oranges side by side and used the line “the best bits in the world”, violated sections 2.17 and 2.19 of the ASAI code.
The first of these sections says marketing communications “should avoid sex stereotyping and any exploitation or demeaning of men and women”; while the second section says advertisers “should take account of public sensitivities”, and, crucially, “should not use offensive or provocative copy or images merely to attract attention”.
Of course, advertisers will argue that creating provocative copy or images to attract attention pretty much sums up their job description. In any case the authority made its feelings known and upheld the complaints.
The consequences for Club Orange are pretty much nil – under the rules, it can’t run that particular poster again, but then the advertising campaign was over anyway.
It was the authority – whose slogan is “setting standards for 30 years” – that had to apologise. In its press release on the complaints bulletin, it had mistakenly identified Club Orange’s owner as CC. The cider-seller had in fact offloaded its soft drinks unit to Britvic way back in 2007, in what turned out to be one of its smarter business moves.
Of course, with newspapers publishing the wordcount equivalent of a standard novel every day, the first response of any reporter or editor on hearing of such a blunder is: “There but for the grace of God go I.”
As for Britvic, it has other problems. Revenues in its Irish division fell in its most recent quarter due to both lower prices and volumes.
Quote of the day
They have built a juggernaut. This is going to be an absolutely blowout, home run product
– Matt Murphy, of VC firm Kleiner Perkins Caufield and Byers, on Apple’s new iPhone5
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Today
The Irish Fiscal Advisory Council, the budgetary watchdog set up to provide analysis of the Government’s fiscal and economic projections, publishes its latest Fiscal Assessment Report
