Dear Sir,
The pension plan known as ‘My Future Fund’, which is set to launch on September 30, appears unlikely to meet its chief goal. Surprisingly enough, this scheme will not be in a position to offer pensions to its retired members.
Upon retirement, the scheme requires employees to depart, delivering them a one-off payment to fully nullify any outstanding scheme obligations. If these individuals wish to transform this singular payment into a regular pension, they are obligated to navigate the marketplace, potentially multiplie times during retirement, in search of an appropriate private product.
Such a requirement undoubtedly causes the members to forfeit the scheme’s collective purchasing capacity and the insight of its fund administrators. This will result in increased fees and reduced investment earnings, subsequently shrinking the pension amount.
The primary reason behind the pension amounts being less than half of what they could potentially be under a different plan is the obligation for workers to leave the scheme upon retirement. This deprives them of ongoing benefits and preservation that come with plan membership.
As justified by an official, the private sector’s monopoly over the post-retirement market is to make up for its pre-retirement exclusion. However, this decision extracts a hefty price: estimations report a potential cost of over €2.2 billion yearly to the economy, from the closure of the scheme’s initial intensification phase. The early-phase cost is likely to be less.
In a 2023 meeting with the Joint Oireachtas Committee, the ESRI presented some disquiets, which were unfortunately disregarded in the final planning of the scheme. Addressing ESRI’s concerns and evaluating the economic cost of granting the private sector the sole control of the post-retirement market isn’t yet too late.
Yours faithfully,
Colm Fagan
(Former President, Society of Actuaries in Ireland)