Irish Pension Funds Collapse Imminent - Thousands Will Lose Savings

Todays Sunday Post is reporting that a collapse of

Report claims pension schemes will collapse
30/11/2008 - 10:17:10

Quote :

It is claimed tens of thousands of workers could have their pensions wiped out over the next six months.

A confidential memo to Government from the Social and Family Affairs Minister Mary Hanafin reveals a total pension deficit of between €20bn and €30bn is expected. This confidential document, seen by a Sunday newspaper, spells out in no uncertain terms that a number of high-profile pension schemes are expected to collapse. That is three times the level of capital needed to bail out Irish banks.

There are currently around 100,000 schemes in Ireland - two thirds of which are defined benefit ones, where the employer bears the investment risk. More than 90% of these are expected to report a deficit to the Pensions Board.

The memo predicts the public collapse of a number of schemes over the next six months and warns that it would be impossible for the Government to pick up the shortfall because of budgetary constraints - no matter how strong the pressure might be.

Where the employer is liable to meet the shortfall, will this mean the employer may be bankrupted?

The implications of this are enormous.

The question remains as to what is the real worth of the National Pensions Fund - Government is now saying that less than 2 billion is immediately accessable with much of the rest held as "assets and equities" that can not be cashed in.

How many of ye here will be affected ? Remember the that ads started a few years ago urging thirtysomethings to start investing in a pension for the future ... did they know what was really on the horizon ?

All the newspapers have this story today even though they don't work on a Sunday - no rest for the worried eh ?

http://www.irishtimes.com/newspaper/breaking/2008/1130/breaking7.htm
http://www.independent.ie/breaking-news/national-news/report-reveals-pension-schemes-will-collapse-1558496.html

p.ie
http://www.politics.ie/economy/38281-pension-schemes-set-collapse.html

Pin - Pension Time Bomb Dwarfs Banking Crisis
http://www.thepropertypin.com/viewtopic.php?f=19&t=16015

Auditor #9 wrote:

How many of ye here will be affected ? Remember the that ads started a few years ago urging thirtysomethings to start investing in a pension for the future ... did they know what was really on the horizon ?

All the newspapers have this story today even though they don't work on a Sunday - no rest for the worried eh ?

http://www.irishtimes.com/newspaper/breaking/2008/1130/breaking7.htm
http://www.independent.ie/breaking-news/national-news/report-reveals-pension-schemes-will-collapse-1558496.html

p.ie
http://www.politics.ie/economy/38281-pension-schemes-set-collapse.html

Pin - Pension Time Bomb Dwarfs Banking Crisis
[url=http://www.thepropertypin.com/viewtopic.php?f=19&t=16015

http://www.thepropertypin.com/viewtopic.php?f=19&t=16015[/quote[/url]]

My husband stopped paying into his pension three months ago partly to cut back, and partly because of having no confidence that it would not collapse, given the state of equities.

We are OK though because Coca Cola are opening a flavour-adding plant in Wexford that will employ 400.

It is a terrible predicament for the thousands of people faced with retirement with only a State Pension, who cut back and saved all their working lives to pay for a pension.

It looks as though some form of Government action/legislation will be needed, if only to stop this from closing down companies who can't meet contractual pension obligations.

My laziness in not starting a pension fund seems to have served me well. But, in any normal society, wouldn't heads roll over this, including Ministerial ones?

toxic avenger wrote:

My laziness in not starting a pension fund seems to have served me well. But, in any normal society, wouldn't heads roll over this, including Ministerial ones?

Why? Are these not privately run pension funds?

Well, poor regulatory oversight, for a start...

toxic avenger wrote:

My laziness in not starting a pension fund seems to have served me well. But, in any normal society, wouldn't heads roll over this, including Ministerial ones?

What do you mean about heads rolling toxic ? I was invited to start a pension fund with AIB a decade or more ago and did so for a number of years. When starting it I told them they were going to invest it on the stock market and what would happen if it crashes. They laughed and said that only happens once every 100 years. Luckily I took it out years ago and blew it on a van trip around Australia.

Normally the stock market doesn't go sideways but this time it did and it's doubtful it'll recover properly for half a dozen or more years. Just when people should be blowing their last few bob on that campervan and dying happily in a caravan park in Morocco, France or Spain.

It looks like Gold was the right investment over the past number of years but this could be a lesson that small personal investments in skills, machines and other stuff (like a fishing rod), knowledge and personal relationships can stand the test of time better than money.

toxic avenger wrote:

Well, poor regulatory oversight, for a start...

There’s not always someone to blame TA.
The rules governing pension funds would be the same here as most countries. As far as I know we have much more individual freedom to decide where our pension money is invested than practically anywhere else, but in the end with something like the falls in all asset values we have had, there is no protection or balance that would save invested funds from taking a hit.

In relation to heads rolling, I mean both pension fund managers having been found to have invested grossly irresponsibly, the Irish Pension Board for not having been all over them like a rash, instead of a laissez-faire attitude, and the Ministerial line manager with ultimate responsibility, including predecessors, who were lax in ensuring proper regulatory oversight.

tonys wrote:

toxic avenger wrote:

Well, poor regulatory oversight, for a start...

There’s not always someone to blame TA.
The rules governing pension funds would be the same here as most countries. As far as I know we have much more individual freedom to decide where our pension money is invested than practically anywhere else, but in the end with something like the falls in all asset values we have had, there is no protection or balance that would save invested funds from taking a hit.

True, but when a laissez-faire attitude to pension funds allows fund managers to invest in a grossly irresponsible manner (and I'm not arguing that there wasn't always going to be some kind of hit, that's obvious and natural), you have to ask whether regulatory oversight wasn't ridiculously lax, and then ask, who's the ultimate line manager responsible?...

toxic avenger wrote:

tonys wrote:

toxic avenger wrote:

Well, poor regulatory oversight, for a start...

There’s not always someone to blame TA.
The rules governing pension funds would be the same here as most countries. As far as I know we have much more individual freedom to decide where our pension money is invested than practically anywhere else, but in the end with something like the falls in all asset values we have had, there is no protection or balance that would save invested funds from taking a hit.

True, but when a laissez-faire attitude to pension funds allows fund managers to invest in a grossly irresponsible manner (and I'm not arguing that there wasn't always going to be some kind of hit, that's obvious and natural), you have to ask whether regulatory oversight wasn't ridiculously lax, and then ask, who's the ultimate line manager responsible?...

If in good times they weren’t allowed to invest as they are everywhere else, we’d have an outcry about the outflow of funds to foreign pension funds or why was the government not encouraging people to save for their own future or why can everyone else get this right but Ireland makes a shite of it and any amount of other arguments I could make. This 20/20 hindsight business has to stop, it’s a waste of time & energy, let us all concentrate on where we are and how best to move on.

tonys wrote:

toxic avenger wrote:

tonys wrote:

toxic avenger wrote:

Well, poor regulatory oversight, for a start...

There’s not always someone to blame TA.
The rules governing pension funds would be the same here as most countries. As far as I know we have much more individual freedom to decide where our pension money is invested than practically anywhere else, but in the end with something like the falls in all asset values we have had, there is no protection or balance that would save invested funds from taking a hit.

True, but when a laissez-faire attitude to pension funds allows fund managers to invest in a grossly irresponsible manner (and I'm not arguing that there wasn't always going to be some kind of hit, that's obvious and natural), you have to ask whether regulatory oversight wasn't ridiculously lax, and then ask, who's the ultimate line manager responsible?...

If in good times they weren’t allowed to invest as they are everywhere else, we’d have an outcry about the outflow of funds to foreign pension funds or why was the government not encouraging people to save for their own future or why can everyone else get this right but Ireland makes a shite of it and any amount of other arguments I could make. This 20/20 hindsight business has to stop, it’s a waste of time & energy, let us all concentrate on where we are and how best to move on.

You might well be right about the Government being left open to criticism at the time, such are the burdens of office. But does that then mean Government should abdicate responsibility despite knowing the possibility of the coming car-crash. I have researched Department of Finance files in the Archives on a number of occasions, one thing that can't be said is that Finance officials were unable to show extraordinary foresight in predicting and outlining future possible scenarios with clarity and intelligence. It's impossible to believe that warnings were not forthcoming here about the nature and level of exposure of private pension funds. Now, I'll grant you, this is a worldwide phenomenon, and deregulatory madness became financial orthodoxy throughout the Western world. But, I refuse to believe that the warning signs weren't there some years ago. And the '20/20 hindsight business' is utterly necessary to understand what happened and why, in order to prevent the same mistakes being made. Government has a responsibiity, even if unpopular, to say ''what's happening is madness, we must act".

Quote :

This 20/20 hindsight business has to stop, it’s a waste of time & energy, let us all concentrate on where we are and how best to move on.

Yes, and no. Blame for point scoring is mind-destroying, but accountability and understanding of what went wrong is essential. We can't understand where we are, or our options for the future, unless we understand the processes that got us here.

Also, making ourselves out just as victims of bad people can be debilitating.

The whole economic system is acting somewhat like that Guinness ad in which the town has been transformed into a domino run. One damn thing knocking the next over.

Does anyone know if there is a risk of companies being sued if they can't pay out pension funds to employees? That would present the appalling vista of a big knock on in terms of unemployment.

There is a massive system failure going on, but it has undoubtedly been exacerbated by bad decisions in Ireland, by Government and the private sector.

As much as I'd like to be able to deliver a kick to the teeth of the government over this, I can't. It wouldn't be fair.

However, they should have seen this coming, whilst they were climbing over themselves to sell our collective futures to resuscitate the dead banking system. Now they've got a real problem on their hands. Folks will not be amused, to put it lightly, when they announce that they can do nothing to salvage or guarantee pensions. Pensioners in general are already pissed and this will be seen, rightly or wrongly, as another example of the government not caring for the elderly.

Today's news will also have a quickening effect. Folks are about to withdraw from their various pension schemes en masse. I shudder at the possibilities of the potential knock on effects.

Health insurance schemes next?

Seems to me that we're about to see a massive price hike in essentials like food and medicine too.

Having seen the IBEC spokesman, there is a smell off this of an employer's move to bump government into deregulating employer pensions schemes. Firms struggling to keep their heads above the water line are eyeing the pension fund for a bail out and Turlough O'Sullivan is looking for a reduced requirement from employers to back up the full payout from the outset of the pension ( if I have heard it right ). The way this has been handled may lead to a total panic, with people stopping paying into funds en masse.

There is a big question mark over both the pension funds and the way this story has emerged.

Serves them right. Pension funds are nonsence. Take your money and invest it yourself in whatever asset you like

youngdan wrote:

Serves them right. Pension funds are nonsence. Take your money and invest it yourself in whatever asset you like

On the ISEQ ?

If you like a company then yes. If you like land on Madagascar buy that. If people feel they are not up to the task then ask someone to help them. Entrusting you money to fund managers is a waste of money as most of them can not ever beat an index fund

youngdan wrote:

Pension funds are nonsence. Take your money and invest it yourself in whatever asset you like

I’d agree with you there, we here in Ireland have had the chance to do just that and still make the pension tax savings on the investment, best of both worlds.

How many pension plans are affected here - 100,000 or something ? If a good fraction of those took the initiative to invest on stuff they wanted to themselves then the market here could be a lot livlier and there might be a lot more money around for local start ups.

Do we have a culture here of doing that though ? It also takes a good bit of time and interest to start off finding a market you like, although we all seem to like property and some people, land.

The Independent reported this back in October:

A

Quote :

LARGE number of company pension schemes are close to collapse and will fail over the coming months unless radical action is taken, pension fund managers have warned.

The dire warning from the Irish Association of Pension Funds (IAPF) came as new figures from Rubicon Investment Consulting showed that pension funds have lost more than a quarter of their value in the past year.

The combined losses have been calculated at around €21bn for the past year.

IAPF chairman Patrick Burke warned that there was a growing number of private sector defined benefit (or company) pension schemes in real trouble

Its not surprising, given what's happened to the markets, that the funds are in trouble. The changing age profile will put pensions under huge pressure anyway.

With a future population that is mainly older people, Ireland will be a very different place. There is already pressure on for people to start thinking of working until they are 70.

If people are fit and well, work is not a bad thing - a lot of people seem to be rapidly knocked back by retirement. Is retirement a completely outdated concept?

cactus flower wrote:

Having seen the IBEC spokesman, there is a smell off this of an employer's move to bump government into deregulating employer pensions schemes. Firms struggling to keep their heads above the water line are eyeing the pension fund for a bail out and Turlough O'Sullivan is looking for a reduced requirement from employers to back up the full payout from the outset of the pension ( if I have heard it right ). The way this has been handled may lead to a total panic, with people stopping paying into funds en masse.

There is a big question mark over both the pension funds and the way this story has emerged.

That was EXACTLY my reaction too - there is a stink of a big fat rat from this one. If you read between the lines what's really being said is that these funds have survived intact because of the regulation that protects them. They've run out of other money to continue speculating with so let's get at this loot now while we can.

I dont know why there is not already full scale revolution in the west.

If the international stock markets have broken down and I have lost most of my pension as a result, being the only type of pension that was available to me, why should I allow the state to use my tax to guarantee the pensions of those who work for the state. Surely we are all in this together?

If the state wants to give me the oprion of buying a civil service pension and making contributions to a defined benefit scheme then I'll cal it quits. Otherwise, all bets are off and I want a fair slice of the cake having behaved prudently as I was told to do by the state who won't honour my PRSI contributions with a decent contributory pension.

Zhou_Enlai wrote:

If the international stock markets have broken down and I have lost most of my pension as a result, being the only type of pension that was available to me, why should I allow the state to use my tax to guarantee the pensions of those who work for the state. Surely we are all in this together?

If the state wants to give me the oprion of buying a civil service pension and making contributions to a defined benefit scheme then I'll cal it quits. Otherwise, all bets are off and I want a fair slice of the cake having behaved prudently as I was told to do by the state who won't honour my PRSI contributions with a decent contributory pension.

There is something inherently unfair and wrong in the same Government providing some workers with a very high standard of living on retirement and others not. Same government, all citizens - what is the justification for it, when it means the poorer are in many cases paying for the better off?

Scrap the lot and protect everyone from poverty, would seem fair, and after that let people decide whether to work on, save or blow it all to hell on the high life.

Zhou_Enlai wrote:

If the international stock markets have broken down and I have lost most of my pension as a result, being the only type of pension that was available to me, why should I allow the state to use my tax to guarantee the pensions of those who work for the state. Surely we are all in this together?

If the state wants to give me the oprion of buying a civil service pension and making contributions to a defined benefit scheme then I'll cal it quits. Otherwise, all bets are off and I want a fair slice of the cake having behaved prudently as I was told to do by the state who won't honour my PRSI contributions with a decent contributory pension.

There could have been more poor regulatory oversight so maybe you should stop paying your car tax, TV licence, go up North to shop (do it once a month), and other stuff. There has to be a minimum fund value below which they can't use for speculation. If you know gamblers then I'd be worried that guidline was kept. A lassie was on Pat Kenny this morning pooh-poohing the panic. She said the funds were down 30% from where they should be and will gain in the long term.

I still say buy a fishing rod and fourteen cases of Spam.