Hi Duke
I have moved the main posts and replies on this topic to this thread as a novel idea like this deserves more prominence.
I certainly like the idea in theory.
Agree that the uncertain longevity expectation, Minimum Funding Standard, requirements for capital, and low interest rates will eventually kill off Defined Benefit Schemes for the private sector.
But we have a Defined Benefit system for all - it's called the contributory OAP. A self-employed person earning €60k but declaring only €20k, pays €800 a year to have a healthy pension guaranteed from the age of 66! An employee earning €100,000 a year has €14,750 contributed to the fund and gets the same pension as the tax-evading self-employed person.
And despite all that or, maybe because of all that, it's totally unfunded. Which probably means that people in their 40s today who are contributing to this fund will be told when they reach 65 that there is no money to pay them.
So that is the type of outcome one gets when long-term issues are managed by Irish politicians.
If you proposed your scheme for a responsible country such as Denmark, and set up an independent body to manage it, it might well work.
Boss they could start with State annuities.
That would be a good place to start and probably finish.
All employees, public and private, have defined contribution pension schemes. When they reach retirement age, they buy an annuity from this government guaranteed, not for profit, body. If they have a bigger pension pot, they get a bigger annuity.
It would absolutely have to be ring-fenced from government interference. The annuity level would be set by someone or some group completely independent of government. Probably a panel of three actuaries from outside Ireland.
They would also decide the investment strategy which, I presume would be fully invested in equities outside Ireland.
While the taxpayer would underwrite it, the clear mandate should be that it would actually build up capital. So the annuity levels should be a bit less than the "right" level. In other words, the recipients pay an insurance premium of 1% to help build up capital.
It would probably be limited to a certain amount - maybe a fund of €800k.
Would participation be mandatory or optional? If it were optional, those with impaired life expectancy would stay outside the scheme.