The state should provide defined benefit pensions for everyone

[Duke of Marmalade]

Moderator's note - moved from the thread suggesting that public services pensions should be switched to defined contribution

I think this suggestion is going in completely the wrong direction.

The demise of the DB pension is one of the socio economic failures of our time and is a rare reversal of the human condition in a sea of advances.

The current paradigm makes it increasingly unviable for private companies to make credible DB promises. But surely we have lost our way if we finish up with the whole population anxiously watching the Dow Jones index both pre and post retirement.

Rather than the State similarly throwing in the towel it should be stepping in to save the DB concept by providing State earnings related pension schemes and State inflation linked annuities. The State has genuine economic advantage over the private sector in this space, this support of DB need not turn out to be an illusion, a time bomb for posterity.

As I say the State has a genuine economic advantage over the private sector in providing DB pensions. It should continue to use this advantage to attract talent into the PS, thus allowing society as a whole to benefit from this 'free subsidy' to our public services.

 

[Brendan Burgess]

Hi Duke

We have that in the Contributory Old Age Pension. While that was meant to be pay related, it isn't. Someone who has never worked gets the same pension as someone who has worked all their life.

I am not sure whether your idea is good in theory or not. But, in practice, this could not be operated in Ireland. The government would promise big benefits and not charge enough to fund it.

Brendan

 

[cremeegg]

But surely we have lost our way if we finish up with the whole population anxiously watching the Dow Jones index both pre and post retirement.

That is a reasonable point

this support of DB need not turn out to be an illusion, a time bomb for posterity.

Well you have certainly hit the nail on the head, a DB pension is likely to be an illusion and certainly a time bomb for posterity. What makes you think it will not be.

 

[Duke of Marmalade]

cremeegg I would have preferred this had remained a challenge to Brendan's suggestion that the PS should also be condemned to DC.

The descent into DC is denying two genuine societal benefits of generational pooling. First there is longevity pooling - nobody knows how long s/he will live. Second there is economic pooling. In the long term real investment activity beats risk free instruments. With DC we are finding that individuals are taking the double risk on their own longevity and on whether they were unlucky enough to have been investing at the wrong time.

The private sector is finding it impossible to viably harness these pooling benefits and instead is abandoning people to the luck of the draw. This is not an inevitable consequence of the human condition - it is a failure of the current economic paradigm.

Brendan wants to condemn public servants to the same failing of the private sector. This certainly has the merits of sameness but it is totally unnecessary and it is denying a true cost saving to society by being able to using security as a 'free' incentive to attract talent into the public services.

 

[Gordon Gekko]

I profoundly disagree.

DC works fine; the problem is that people are lazy and ignorant and prefer not to take responsibility for their financial future.

DB is a bankrupt model and should be shut down in all forms.