Support Global Action on Aging!



Pensions warning by World Bank


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.

If we are to avoid a pensions time bomb, Mr Hinz said the issue for people in the future was whether they wanted “to eat well or sleep well.”

Responding to 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.

Giving workers 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.

“This means 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.

Finnish MEP 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.

“This 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 head-on.

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 by 2056.

“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.

The NPRF is currently worth €8 billion, having lost over €700m in the stock market meltdown last year.

Copyright © 2002 Global Action on Aging
Terms of Use  |  Privacy Policy  |  Contact Us