Mick Clifford: Home truths about retirement prospects
Automatic New System Maxwells The Savings Minister Picture: Protection Social Of Heather Announcing State's Retirement Enrolment Details Humphreys
There was a glimpse of the future during the week and, to mangle a line from Beckett, things are looking dark, to put it brightly.
On Tuesday, the Government announced the introduction of an auto-enrolment scheme for pensions. This is a welcome and belated move.
Demographics dictate that the workforce in years to come will find it very difficult to support pensioners, as per the existing social contract.
Right now there are five people working for every one who is aged over 65. By 2051, this ratio will be down to 2.5 to one. According to the Central Statistics Office, there are currently around 690,000 people over the age of 65.
In 30 years’ time, this cohort will rise to 1.6m. There is a desperate need for all parties to invest far more in pensions if current standards of living in retirement are to be aspired to.
The State is finally catching up with other western European countries with a scheme that will see mandatory contributions from the individual, State, and employer. Within 24 hours, another truth came dropping.
It emerged that one of the selling points for the scheme at Cabinet was that it would be particularly important, as an increasing number of people will be still paying rent in retirement. They “will need sufficient income to meet rental costs during their retirement years”, the memo stated.
The reasoning is based on evidence. Last October, insurance company Aviva conducted research into pensions and found that a quarter of householders believe they will still be paying mortgages or rent when they retire.
The fear of late-life worry in this respect was keenest among women aged between 35 and 44, who might be described as the older cohort of “generation rent”. And it wasn’t only younger people who had this fear.
A fifth of those aged over 55 also believed they would be paying for their accommodation in either mortgage repayments or rent on retirement. This is a shocking indictment of housing policy and action going back for decades, but particularly since 2011.
Home ownership is highly valued by both Fine Gael and Fianna Fáil. Just last week, the Taoiseach reiterated the policy. “I believe in home ownership,” he told Mary Lou McDonald in the Dáil. “I’m not sure that you do, what with all that your party does.”
Nobody questions Micheál Martin’s beliefs in this respect, but his faith may now be based more on fantasy than realistic expectation. During another Dáil clash in February, the Sinn Féin leader suggested to Martin that his party and Fine Gael had made home ownership “a pipe dream for an entire generation”.
The Cabinet memo referencing the pension auto-enrolment chimes with McDonald’s observation. So if the Government accepts that here lies the future, what else is it going to do to prepare the ground? What enhanced protections will be put in place to ensure that all renters, and particularly those in retirement, do not have to live with the perennial fear of losing their home? What measures are required to ensure that retirees are not going to be subject to soaring rents if the market so dictates? Where is the recognition that the old landlord-tenant model is completely unfit for purpose in an era when home ownership is beyond the reach of so many?
There are two obvious areas that need to be addressed.
The provision that a tenant can be told to leave on the basis that the landlord requires the property for a relative is open to widespread abuse. There is sufficient anecdotal evidence that it is being used in some cases merely to get one tenant out, do a little refurb, and catch the rising tide of even higher rental return with a new tenant.
Another issue that could be looked at is vacant possession. Why, with an investment property, is it necessary that it be sold on the basis of vacant possession? Addressing that would require a change of mindset but would merely be an acknowledgment that we are living in changed times.
These kind of measures cannot be longfingered if, as is now obvious, there is a growing acceptance that a whole generation will be experiencing very different retirements from that enjoyed by today’s pensioners.
The Government is not the only entity longfingering the evil day when reality must dawn.
During the week, Siptu’s annual conference was told that any attempt by Social Protection Minister Heather Humphreys to raise the pension age to 67 would amount to signing Fine Gael’s “political death warrant”.
The union’s deputy general secretary, Ethel Buckley, said Siptu had played a key role in forcing an “epic U-turn” by the Government on the pension issue. On that, she is correct. Raising the pension age has become a political potato too hot to handle.
Fine Gael, as is often the case when the party is not dealing with its own base, made a cack-handed attempt in 2019 to raise the pension age in response to actuarial forecasts and demographics. Then Sinn Féin made hay on the issue in the 2020 general election and reaped a fine harvest. Thereafter it was hived off to a commission, which ultimately recommended that the age has to be raised but far more gradually than had been initially envisaged.
Now, however, nobody in Leinster House wants to go within an ass’s roar of the issue. This was most recently evidenced in an all-party Oireachtas committee report in February that stated the pension age should not rise above 66. That’s fine and dandy, but who’s going to pay for it all? There’s room for increased PRSI contributions from employers, but that will only go so far.
Certainly, without radical change, best effected over a long term, there is little hope that in, say 20 years’ time, workers will be retiring at 65 and enjoying a standard of retirement comparable to that which pertains today. Is that fair?
As has happened before, the mugs who will have to foot the bill don’t have a seat at the negotiating table.
In 2011, Government decided — with little opposition from unions — that new entrants to public-sector jobs such as nursing and teaching would have to start on lower salaries in order to pay for the excesses of the Celtic Tiger years.
Today, political parties have all come around to the thinking that it is tomorrow’s workers and families who will have to stump up more in order to continue with the fallacy that, to quote Ms McDonald, the demographics will take care of themselves. In such a milieu, enacting an auto-enrolment scheme is akin to bringing a few buckets of water to tackle a house fire.