Most people's eyes glaze over when the word pension is mentioned. But at this stage of our economic and social development the imaginative use of pensions and pension funds could generate a virtuous cycle.
Last Thursday the Irish Pensions Board submitted a new plan to Dermot Ahern at the Department of Social, Community and Family Affairs. The report was two years in gestation and proposed a scheme of retirement benefits for Irish citizens over the next 50 years. Long-term political planning had, at last, arrived. And Proinsias De Rossa is to be complimented for setting the review in train while he was minister for social welfare.
There are a few things to be said about the broader, European picture. Germany and the major European economies are facing a disaster where reducing numbers at work and growing numbers of old-age pensioners make "pay-as-you-go" State pension systems prohibitively expensive.
By contrast, Ireland is in a healthy situation because of demographics and the existing funding system. And we have time in hand to address future problems.
Instead of cutting back on the size of State pensions, the National Pensions Policy Initiative has proposed that the Government should share the benefits of the so-called Celtic Tiger by expanding benefits to an average of 34 per cent of national income, from the present level of 28.5 per cent. This would give an old-age pensioner an extra £16 a week over a five-year period.
Such payments would become difficult to fund for a rapidly ageing population after 2025. In preparation for that eventuality, the Pensions Board asked the Government to establish a separate fund to which it would contribute £250 million from 1999 to 2003; £500 million from 2004 to 2008, followed by an annual contribution equal to 50 per cent of projected PRSI contributions to pensions.
In addition, the board recommended the formation of an additional, low-cost Personal Retirement Savings Account to which all employees, including part-time and casual workers and the self-employed, would contribute, along with employers, to bring pension entitlements up to 50 per cent of retirement pay levels.
The creation of such a fund prompts questions of State guarantees for potential beneficiaries, compellability and the involvement of the pensions industry in its operation.
These issues, along with the funding of State pensions, will be of considerable interest to the social partners, within Partnership 2000. The Coalition Government and Charlie McCreevy will have much to discuss in the months ahead, particularly in the context of Ireland's application for the next tranche of EU structural and cohesion funding.
Imagination and practical patriotism will be required if Ireland's economic miracle is to be sustained into the new millennium. And the main problem facing the State is the inadequacy of our economic infrastructure, particular in relation to road, rail, electricity, telecommunications, sewage and water treatment works. By contrast with developed European countries, we run a ramshackle infrastructural system with a cumulative investment deficit. And grants from EU structural and cohesion funds to develop that network are due to dry up by 2003; at the latest by 2006.
In that regard, a speech made by Ruairi Quinn to the Irish Association of Pension Funds last month deserves to be dusted down. The new leader of the Labour Party suggested that rather than fund the needed investment by increasing income tax levels the capital could be raised through pension funds.
The creation of special investment bonds, which would pay 12 per cent more than ordinary government bonds, was the way forward, Mr Quinn suggested. Foreign stock markets could not go up in a straight line forever and pension fund managers should explore new investment options at home. IBEC has already nibbled at the idea of "Public-Private Partnerships" as a means of encouraging private sector investment in infrastructure. And the Taoiseach has taken soundings in New York about the possibility of US investment in projects capable of generating commercial returns.
For his part, Mr Quinn was bluntly critical of the close-minded conservatism that pervades both the Pension Fund Association and the Department of Finance. Together, he said, they had "stifled new thinking" and had refused to consider the creation of new financial mechanisms to fund capital investment.
The sale of State assets, such as Telecom Eireann, would be nowhere near adequate to meet the State's investment needs, he said. New strategies had to be invented.
It sounds as if a lot of imaginative thinking will be required in the coming years, not just by Charlie McCreevy and his Cabinet colleagues but by pension fund managers and Government officials.
It would be wrong to suggest the pensions industry has not already contributed enormously to the development of the State. At the end of 1997 pension funds held about 58 per cent of their total assets in Ireland, with 31 per cent in Irish equities, 15 per cent in government gilts and 12 per cent in other assets, including cash and property.
But the creation of a Single European Currency and the removal of existing ERM exchange rate risks may encourage some fund managers to explore the greater European market. The grass is always greener on the other side of the hill.
There is no obvious reason why investors should look abroad for opportunities when the Irish economy is leading Europe in terms of growth. Especially if the Government was prepared to design investment bonds with a built-in bonus.
In Germany, 90 per cent of pension funds are invested in bonds and only 10 per cent in equities. Security and the national interest, rather than risky, speculative gain, take precedence with the fund managers there.
Given the enormous wealth of pension funds in this State and the likelihood that savings and investments will increase rapidly in the coming years, any minister for finance could be forgiven for lusting after their assets. A voluntary switch in the industry's investment strategy would, however, underpin future economic development while providing for the future of both our children and our pensioners.