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warning by World Bank
April 29 2003
By Brian O’Mahony, Chief
Business Correspondent World Bank official Richard Hinz warned yesterday
that pension entitlements may have to be cut in half or people will have
to work up to 10 years longer to achieve their financial retirement goals.
questions, Mr Hinz warned that individuals would have to shoulder much
more of the responsibility for their own pension funds, as more and more
employers were no longer prepared to bear all the risk related to pension
funds because of the cost involved.
more responsibility for providing for their retirement was a move away
from a “paternalistic” way of doing things when the employer decided
what was best for his workforce.
He denied the
days of the defined benefit scheme were gone, but admitted that
significant “restructuring was taking place across the globe, which was
placing much more of the risk and the cost of pension provision on the
shoulders of the individual.
Mr Hinz was
speaking at the World Pensions Association Annual Conference in Dublin
yesterday, organised by the Irish Association of Pension Funds.
In his address he
warned: “demographic changes will mean that in some countries pensions
could have to be reduced by half or retirement age increased by up to 10
years to make the current systems financially viable in the long run.
that around the world, pension systems are being reformed. “This has
been led by regions such as Latin America, Central and Eastern Europe, and
these are now being joined by the more developed and least developed
countries,” he said.
Piia-Noora Kauppi said: “pensions in Europe will have to be reduced in
the future or more of our GDP will have to be spent providing pensions.”
Only 25% of people in Europe are covered by supplementary occupational and
personal pension schemes, she said, underlining the urgent need to develop
Pan European Pension Funds.
development of Pan European Pensions has now been facilitated by the
passing of the EU directive on Institutions for Occupational Retirement
Provision by the European Parliament,” she said.
Former Elan boss
Donal Geaney, chairman of the National Pension Reserve Fund (NPRF) said
the pensions time bomb was something the Irish Government had tackled
Today, there are
five people at work for every pensioner in Ireland, but that will have
fallen dramatically to just under two people at work for every pensioner
“This is a
dramatic change in our population structure by any standards. By
allocating the proceeds from the sales of Telecom Éireann and 1% of GNP
annually, the Exchequer burden lessened,” Mr Geaney said.
Mr Geaney added
the NPRF had been internationally applauded for its response to the time
bomb implications indicated by an ageing population.