Government to privatise pensions?

Joan Burton’s announcement that a universal pension scheme will be established for private sector workers on the surface can be seen to be a step in dealing with the crisis many workers without pensions will face on retirement.

The Organisation for Economic Co-operation and Development (OECD)  have been asked to come up with recommendations as to how such a scheme will work by February 2013. The OECD is one of many international institutions whose publications and commentary consistently seek to drive a pro-capitalist agenda.

Essentially, similar to the scheme that is already supposed to exist in the construction sector, the government intends that every employee in the private sector will be automatically opted in to a pension scheme that will be supervised by the National Treasury Management Agency and that deductions be made from wages alongside contributions from employers to fund the pension.

Price Waterhouse Cooper’s produced a damning report which revealed that private pension companies where siphoning up to 30% of funds in various administrative charges and the smaller the amount of workers paying into a particular scheme, the higher the deductions.  What PWC doesn’t mention is the waste of resources that goes into private pension companies engaging in competitive advertising.

There is the on-going scam of tax relief for pensions which in the absence of a decent alternative we would defend for low and middle income workers but for very high earners and the rich is simply a tax avoidance scam. The soft left think tank TASC in their 2010 Pension Policy update cited the example of 2008 where tax relief for pensions cost the exchequer €3 billion but that the 80% of that benefited the top 20% of earners.

Finally, running separate pension funds for workers in different sectors or workplaces is a recipe for disaster as has been witnessed in the likes of Waterford Glass and the ESB but also by the fact that most defined benefit schemes have been discontinued and replaced by inferior defined contribution schemes.

There is much alarmist talk from the right wing of the “demographic time bomb” which in plain language is the aging of the population. That’s why the approach socialists advocate for dealing with the pensions crisis has to be linked with policies to deal with the unemployment crisis and emigration so that the maximum amount of people are part of the “active” population supporting those who have made their contribution in their working lives.