Madam, - Jim Stewart, in his excellent article on pensions (December 1st), hints at the fact that equities are not a suitable investment for pension funds. There is a very important reason why we need to be sceptical about investing pension money in equities, and that has to do with inflation. In the old days, when we had our own currency, inflation rates were high and asset-backed investments, such as equities and property, were an appropriate way to overcome the worst effects of inflation. Since we joined the EMS, and then the euro, that no longer applies. We now live in a regime of low inflation.
In such conditions, equities are no longer an appropriate investment. We have the massive disadvantage, namely costs, without the anti-inflationary benefit. Around the world, there is a general tendency for low-inflation countries to avoid equities, in favour of investments such as bonds.
Our problem now is that the pensions industry has got it into its head that equities are the best option. They point to historical evidence that equities have proven to give the best return over the long term. But most of this evidence applies to the old days of high inflation; it is just irrelevant to today's conditions. As mentioned by Jim Stewart, investing pension funds in equities involves enormous costs; armies of fund managers, investment advisers, analysts etc. eat into the fund member's contribution and reduce the final pension.
Even if it is clear to the industry that equities are not a suitable investment, it will not lightly give up such a lucrative source of income. Looks like another job for the Financial Regulator. - Yours, etc,
NORMAN STEWART,
Malahide,
Co Dublin.
Madam, - Talk about a Marie Antoinette moment. Listening to Minister for Social and Family Affairs Mary Hanafin advising those in private pension schemes that they can always fall back on the social welfare pension as the stock markets crash, is a bit rich when the Minister herself will have the luxury of no fewer than four pensions when she retires, (Minister, TD, teacher and social welfare). These are all Government-guaranteed and funded by the taxes of those poor devils who are now watching their private pensions going up in smoke. And now she proposes to spend more taxpayers' money pursuing the whistle-blower.
Is this Government living on the same planet as the rest of us? - Yours, etc,
EUGENE McELDOWNEY,
Howth,
Co Dublin.
A chara, - Minister for Social and Family Affairs Mary Hanafin suggests (December 2nd) that most people who might choose to defer purchase of their annuity as pension would have the State pension to fall back on.
However, any person considering this would also need to know that applications for State Pension Transition should be submitted five months before the 65th birthday, and for State Pension Contributory five months before the 66th birthday.
If a person leaves it later, arrears may indeed be paid afterwards, but the person concerned could be left without a pension for up to five months.
In addition, in order to determine a person's entitlement, a copy of the insurance record is needed, and it may take the department 10 to 12 weeks to forward a copy of this to the applicant.
It appears from this that the pensions section of the Minister's department either has not been modernised into the age of Information Technology, or is severely understaffed, or both. - Yours, etc,
PÁDRAIG McCARTHY,
Booterstown,
Co Dublin.