However, there are so many variables which could tip the balance from a reasonably healthy scenario to a disastrous one, that really accurate predictions are hard to make. Who after all really knows what’s going to happen to our birth and mortality rates? Who can know for sure whether Europe will, for example, take in millions of Africans to boost its labour supply shortage, and so help pay for tomorrow’s pensioners? Who can know whether women having lots of babies when they are young will become popular again?
What we can be sure of though is that if the current trends continue, which is basically having less babies and living longer, we are in trouble. It is irresponsible and downright silly for the current Leader of the Opposition to say he doesn’t want to tackle this issue because it’s not a problem yet. This is partisan talk at its worst. By the time there are too few people working to pay for the pensioners’ retirement income, it will be too late to act. Can you imagine the scenario in 25 years’ time when you have reached retirement age and want to draw your pension but there is nothing to fund it?
How can any government deal with this crisis when it erupts?
It needs to be dealt with now but it needs to be done realistically. I think this is one debate where the highest standards of honesty and integrity must be adhered to by all concerned. And by all concerned I mean the government, the opposition parties, the big social partners as well as those parties who are in the pensions business, not to delude people with false promises.
One of the easiest solutions to this problem you hear being bandied about by the chattering classes (when they’re not discussing the value of their property investments or who is having it off with whom, or what so and so wore again, or how there wasn’t enough food at a particular wedding!) is private pensions. But we must remember that private pensions have been around for quite a long time in the UK for example, and yet they still have a crisis on their hands which is just as bad or worse than ours. Private pensions can certainly help but they are not enough on their own.
Recently, another pensions report came out in the UK showing that even with the introduction of private pensions and the massive participation in them, a cool 12 million people are still not paying enough to even have the most basic of decent living standards when they retire.
The report made a number of recommendations because, like with most problems, there is never one solution but a variety of things that need to happen.
I hope we do the same thing here and come up with a number of strategies to help solve the problem of the pensions shortfall. I hope even more that the Opposition parties, and particularly the union leaders, will not just focus on one strategy (like raising the retirement age) and become all political and alarmist about it.
Essentially, the UK report talked about a trade off between retiring early and having less income and retiring later and having more. And when they referred to early retirement they were talking about the current retirement age! For every extra year you work you add another X per cent to your own pension fund, which seems to make sense, except of course for those people who work in certain physical jobs where you really are past it even before you reach pensionable age.
Sky News picked up on the report and asked its viewers what they would be prepared to do? I think the results were interesting and perhaps when one of our popular programmes like Xarabank or Bondiplus or Arena take up this issue they could ask the same question to see if we think like the British!
Only 11 per cent wanted to work longer to improve their pensions! Forty per cent wanted to save more. Forty-four per cent wanted to pay more tax and five per cent were ready to accept less.
About half, in other words, want the government to take over this responsibility through central taxation, while another half wanted to take responsibility and save for it themselves. I find these TV surveys amazingly accurate. Recently, I was on the new Arena programme on Net. When asked whether the government should have a say in property prices, around 70 per cent said no and nearly 30 per cent said yes. These percentages accurately reflect on the 70 per cent of us who are owners (and have therefore worked hard to help ourselves) while the other 30 per cent either live in the old, cheap, fixed rents houses, or in cheap government rentals. The UK survey on pensions reflects as well on those who are trying to save and plan for their own retirement, and those who think the government should do it all through taxation!
Now this is fine as far as it goes, but those who work hard in this country and abroad, are a little tired of this handout culture and, while happy to support those who cannot help themselves, they don’t want systems which encourage little effort or self-help.
So we have a number of things to do here too. We have to raise the retirement age in stages. We have to incentivise people to save more for their own pension. We may also have to, through taxation, start a pensions fund for the future. And most of all we have to start explaining to people again and again the simple trade off between how much they will have to live on when they retire as opposed to how much they save for it!
The PN has never been the greatest salesman of its own policies, but has still managed to win an unprecedented number of elections. On the pensions issue the trade off has to be explained honestly again and again. Don’t present private pensions as the only solution though because many people can’t anyway afford to put much more away if they are bringing up a family, considering the bills they have to pay.
Alternatively, do what many others are doing to save for their pensions and invest in property, as early as you can. So far, here, and in the UK and elsewhere this seems to have generated a better source of income than any private pension fund or government policies can ever do on their own!!