McKinsey says State pensions unsustainable

Sarenco said:
Who is to say there won't be a real increase in the productive capacity of the economy over the next 50 years?
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I am certainly not saying that.

What I am saying is that in a scenario where we go from 6 workers for every 1 pensioner to 2 workers for every pensioner, only a huge increase in productivity will allow that reduced number of workers to support that increased number of pensioners. And I am also saying that pension savings will do nothing to help that at the level of society.

You started this thread by saying the impending pension crises should be a feature in the forthcoming election, and I agree completely.

Other posters then said that in response to the pensions crises we need to save more. I am trying to point out that this is factually incorrect.

Future living standards will depend on future economic output, pension savings at an individual level may get you a bigger share of that future economic output but they will not increase it.

Or as a wise person once said "In aggregate, people cannot defer consumption to provide for their retirement."
 
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I suppose due to prevailing economics of globalisation, the argument for euthanasia will start to be pushed onto society by our puppet masters, then the ratio of workers supporting pensioners will reduce.
 
cremeegg said:
Other posters then said that in response to the pensions crises we need to save more. I am trying to point out that this is factually incorrect.

Future living standards will depend on future economic output, pension savings at an individual level may get you a bigger share of that future economic output but they will not increase it.
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I don't think anybody would argue that deferred consumption (savings) at an aggregate level should increase future economic output but it should ensure that future retirees receive an adequate share of that future economic output. That's about all we can plan for in this context.

My broader point (and I think we might be in agreement here) is that the State simply will not be in a position to be as generous to retirees in the future as is currently the case, due to demographic changes. It seems to me that the real question, therefore, is whether this should be borne exclusively by future retirees or whether this escalating cost should be shared across generations.
 
Here's a relatively brief article from McKinsey on the differing approaches of other developed countries on tackling the sustainability of their respective pension systems.
 
There was a similar thread a couple of months ago about there being no concern about the state’s unfunded pension liabilities. http://www.askaboutmoney.com/thread...e-states-unfunded-pension-liabilities.194889/

My view is that productivity won’t be sufficient to compensate for demographic changes and no government will start early enough to find a solution before it’s too late. Therefore future retirees will fall into two broad groups – those who have made little/no provision for their own retirement and will have to survive on a considerably reduced subsistence pension; and those who HAVE made sufficient provision for their own retirement – these people will see their ‘paid-for-for-40/50 years state contributory pension’ slashed leaving them to live primarily on their own privately funded retirement income. Neither prospect is appealing to me but as I don’t want a subsistence existence in my dotage, I’m going to look after myself. I would love to think that my household will have 2 x €12K state pensions coming in as part of our retirement plans but we’re planning as if this will be zero – anything above that will be a bonus.

Overall, part of my post from the other thread still sums up where I personally am at in thinking about the undoubtedly huge future state pension issues:
orka said:
I started off thinking that it's a huge problem and something should be done. Now I still think it's a huge problem but from a selfish, personal point of view, I don't think it's in my interest for something to be done. As a high earner, I can pretty much guarantee that any solution will involve me paying in a lot more than I would ever get back. I am better off putting the cost of any solution into my own savings and looking after myself - in the full expectation that the contributory pension will be a lot lower/means-tested when I retire in 20/25 years time.
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Hi Orka

I certainly understand your perspective but I find it pretty depressing to contemplate the prospect that a substantial proportion of future retirees can only look forward to a subsistence existence in their old age.

I also find the constant refrain that no government will tackle this issue somewhat defeatist. This has been a major source of debate in most other developed countries and I remain hopeful (perhaps naively) that voices such as the Fiscal Counsil will ultimately be heard and will prompt a policy response from government.

Of course, the primary responsibility for forcing this issue onto the agenda rests with the electorate.
 
Talking about pensions.

orka said:
I started off thinking that it's a huge problem and something should be done. Now I still think it's a huge problem but from a selfish, personal point of view, I don't think it's in my interest for something to be done. As a high earner, I can pretty much guarantee that any solution will involve me paying in a lot more than I would ever get back. I am better off putting the cost of any solution into my own savings and looking after myself - in the full expectation that the contributory pension will be a lot lower/means-tested when I retire in 20/25 years time.

If good things come to pass and this is not an issue when I retire, happy days. But I don't think hope is a great strategy so I would rather trust myself than politicians to look after me in retirement.
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This is hugely important matter. It seems to me that the public service is breaking down due to concerns like this, and not just in the area of pensions.

My major concern at present is education. I have 3 children in secondary school. Lets be honest despite much hard work and effort by some individual teachers the Irish education system doesn't fulfil the aspirations of many Irish parents. Educational policy is all about inclusion, there is little emphasis on excellence.

The response for those who can afford it is to look outside the public system. This reduces the aspiration levels of parents generally within the public system, and leaves people who want more for their kids wondering why they are paying on the double.

The same situation applies in Health.
 
Sarenco said:
So should we do nothing at all?

It seems to me that the most equitable way to address this impending crisis is to share the escalating cost between current and future retirees, in both the public and private sectors.

According to McKinsey, people in the bottom 40 per cent of household income do not suffer a fall in consumption power in retirement with the State pension replacing a large part of their pre-retirement spending. Is that sustainable?

It is worth bearing in mind that Ireland scores well on poverty in a relative sense, with a poverty rate in retirement of 6.9 per cent that is lower than both the poverty levels for the Irish population as a whole and for retirees in most other OECD states. As a society we are very generous to our retirees compared to most comparable countries but can we afford to continue to be this generous?
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the power of pensioners as a political force in this country is not only represented in the number of lobbyists that demographic has batting for them ( age action etc ) but the narrative which dominates , beit from listening to politicans or even the general public , the received wisdom is that pensioners are badly off but that they more than paid for the level of benefits they currently draw down , both perceptions are almost entirely false

changing attitudes towards the pension time bomb is going to be a bigger task than the economic challenge the country faced from 2008 on , their is zero political will to deal with it and incredible ignorance amongst the general population with regard the reality of the situation
 
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