Pensions wiped out

EDITORIAL

THERE was bad news this week for workers looking forward to retirement on a reasonably comfortable income, as it emerged that almost €30 billion has been wiped off the value of private pension funds over the past two years. A large segment of the workforce faces the prospect of lower retirement incomes because pension funds are in serious deficit.

Private pensions have traditionally provided an important add-on to the State pensions. Plans for golden years are built around the prospect of this additionial nest egg but now pension scheme members will have to be far more conservative in their retirement plans.
In recent years, concerns have been raised about the performancce of pension funds in light of the decline in the econony and the turmoil in financial circles. An increase in life expectancy and the proposal to push out the retirment age to 68 will place an additional burden on private pension funds to meet obligations.
The Pensions Board 2009 annual report, published this week, zoned in on how things have gone so radically wrong. Chief executive, Brendan Kennedy, was quite direct in pinpointing the root of the problem – not enough people were asking questions about where pension money was being invested. He also queried the quality of professional advice given to pension trustees regarding risk and investment and voiced concern that the chances of further losses remain too high.
Despite good investment returns for almost all schemes in 2009, it is estimated that about 75% of defined benefit schemes, considered to be the more secure funds, were still in deficit at the end of the year and in many cases, the deficit is substantial. Workers in defined contribution schemes, where the employee carries the risk, also face the prospect of lower retirement incomes.
“The investment returns for 2009 provided some relief for pension scheme members. However, there are concerns about how these returns were achieved. Irish pension schemes suffered serious losses between 2007 and early 2009 because of the substantial investment risks being taken.
“In the years when investment returns were high, not enough people asked what risks were being taken in order to achieve these returns. In particular, too few defined benefit schemes considered whether their investment strategies were appropriate given the liabilities of the schemes or whether the risks being taken were consistent with the ability or willingness of the sponsoring employer to underwrite any losses,” Mr Kennedy said.
Mr Kennedy maintained there must also be an appropriate balance between the level of contributions and investment strategy and associated risk. “The experience of Irish pensions over the last few years, whether defined contribution or defined benefit, is a clear demonstration that this balance is not yet being achieved,” he said.
There is also a great deal of concern that plans to cut pension tax reliefs for those on the 41% band could compound difficulties. At the launch of the report, the Minister for Social Protection, Eamon Ó Cuív, dismissed such suggestions. The Government intends to cut the tax relief for those who pay tax at 41% to 33% and for those at the 20% level, the tax relief will rise to 33%.
Meanwhile, a welcome aspect of the report is the commitment that, outside of cases of genuine errors, employers in the construction sector who are non-compliant in remitting employees’ pension contributions will be vigorously pursued.
“This non-remittance is an inexcusable exploitation of employees, many of whom may not feel able to protest because of fears for their jobs. The current economic difficulties being experienced within the construction sector are no justification for this behaviour,” it has been noted.
One of the lessons to be learned from this latest report is that there is a need to have the strongest possible measures in place to safeguard the investments of thousands of Irish pension fund members. Workers should be able to look forward to retirement, rather that approach it with trepidation due to concerns over a severly diminished income.

HSE asked to apologise
THE Health Service Executive’s failure to properly investigate a report of alleged abuse of patients in the Clare Mental Health Service has incurred censure from the Office of the Ombudsman.
In fact, the Ombudsman has asked the HSE to apologise to retired nurse Bridie Cox, over its failure to properly investigate her reports of alleged abuse of patients at Clare health facilities in 2003 and 2004. The Ombudsman has also upheld a formal complaint by Ms Cox on the issue.
While viewing this response as a vindication of her actions in registering her complaint to the HSE, Ms Cox is more than a little disappointed that the Ombudsman says, “it would not be appropriate for this office to ask the HSE to reopen its investigations”. The office took this view on the basis that there are now new appointments and new services within the Clare Mental Health Services.
It’s not the end the line for Ms Cox, however, as she is pressing for an independent investigation into what she claims was abuse and neglect of a number of patients in the service. She believes that a new investigation would result in a different outcome as staff had closed ranks and were afraid to speak out when her initial complaint was made.
In a letter to a HSE manager in September 2006, Ms Cox claimed the incidents had been witnessed by other staff, as well as by clients of the service.
In the absence of any evidence to support her complaints, three HSE executive members, appointed under its Trust in Care policy, decided her allegations didn’t warrant further investigation.
The HSE’s position, as reflected in the Ombudsman’s letter to Ms Cox, has changed somewhat since then. In explaining the outcome of its review of the HSE’s investigation, the Ombudsman said “The HSE, while defending its investigations as thorough, admits that it did not follow the Trust in Care policy under which it is committed to investigating your complaints”.
A HSE spokesman said this week that apart from Ms Cox, 12 members of staff, along with all the surviving clients who were allegedly abused, were interviewed. “None of the clients or any member of staff interviewed provided any supporting testimony for the allegations made by Ms Cox. Likewise, no supporting evidence for the allegations could be found in the clinical notes and records,” the spokesperson said.
Given the gravity of the complaints made by Ms Cox and the general distrust in the health system countrywide, an independent inquiry might be the only way to bring closure to the issue.