Photo credit: Jason Clarke Photography (CC BY 4.0 https://bit.ly/31hRcPs)

The (relatively) sensible Government pensions plan

The first thing to say about the Government’s pension plan is that it absolutely shafts those who avail of it, which is, on balance, a good thing.

How does it shaft you? Well, here’s consumer reporter and finance boffin Sinead Ryan:

What Sinead leaves out of that equation, of course, is that for working for four extra years, you can earn a quadrennial’s worth of extra wages. And pay taxes on those. The Government gets more income from taxes, and pays you less in a pension, and presents the whole thing to you as doing you a favour. In a government entirely short of political genius, this is a rare outbreak of dastardly cleverness.

And sometimes, you know, dastardly cleverness in a Government is a good thing. Put simply, and there’s no way around this fact, Ireland cannot afford its present pension commitments. If there is no change, then we will – sooner or later, and probably somewhere between sooner and later – run out of money.

It seems an eminently reasonable compromise, then, to allow those who wish to work longer to do so, and to reward them a little bit for their patriotic choice.

Whether this will be enough to stave off the crisis long term remains to be seen, and will depend entirely on how many people take up the offer. From the Government’s point of view, though, it does something much more important than staving the crisis off long term: it staves the crisis up for the remainder of their term in office. If the plan ultimately fails, well, it’ll be up to Mary Lou McDonald to come up with a better plan.

The problem here is that when you have no money for pensions, there are, basically, only three things you can do. These things are:

  • Raise the pension age
  • Reduce the pension amount
  • Dramatically raise taxes to pay for pensions

There is no fourth option. The Government here is trying to take the first option, by stealth. It’s about the only one you can do by stealth: There’s no stealthy way to reduce the payment, or raise taxes. People will notice those.

There is also here something else that is rare enough in Government to be treasured here: A plan to change the country’s habits with soft power, rather than hard legislation. They hope that working until 70 will become the de facto cultural expectation, rather than something that they have compelled people to do. If this works, it will be a genuine success of Government policy, and is therefore to be welcomed.

That fact is reflected, I think, in the response of Sinn Fein, who describe the move as a pension age increase by stealth. That is exactly what it is, and what it is intended to be. The problem for Sinn Fein is that it’s hard to oppose, because nobody is being forced to keep working.

As I say, a rare example of genuinely inventive Government. The thinking outside the box should be welcomed.

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