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That Irish Nationwide Fingelton pension plan… Nice work if you can get it… March 27, 2009

Posted by WorldbyStorm in Economics, Economy, Irish Politics.
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Fair dues to Róisín Shorthall, Labour TD and Spokesperson on Social Family Affairs, who makes a very important point that should not be lost in the current situation when she writes in the Irish Times in response to a piece by Vincent Browne on ‘balance’ in the Budget, that:

I wasn’t on The Week in Politics on Sunday. I was, however, on Questions and Answers the following night, where I made the point that it was indefensible that Michael Fingleton was getting a €27.6 million pension to which he probably didn’t contribute, while at the same time a public servant on €20,000 was being asked to pay a pension levy on his or her pension. Equally, I said it was disgraceful that the taxpayer probably funded several millions of Mr Fingleton’s pension as a result of Government policy allowing big tax reliefs on pensions for the rich.

There are two core issues she raises here. Firstly that the sort of pension in the commercial sector which Fingleton took is open to massive subsidy from the public purse, and as she notes, due to the fact that these pensions are provided for mid and higher level employees/employers in the main they are skewed in terms of coverage to the better off who can avail of the higher rate of relief on their contributions. Relief is such a neutral term, isn’t it? But it does of course cover the basic truth that those are monies that would otherwise find their way into the public coffers.

Secondly she points to the basic injustice of those on 20,000 euro wages being asked to pay a further levy on their pension (I have no problem, incidentally, with a graduated progressive levy that encompasses all state employees and who knows, perhaps the Budget will bring one in).

There is a further injustice. What of those who benefit from neither public nor private pensions but are reliant on the state pension. Well, as it happens the state (contributory) pension is the best I can look forward to in the future so, what princely sum is given to those of us who will be fortunate enough to make it to retirement age (66 – no early retirements here or golden handshakes while you’re in your mid 50s). Here are the figures from citizens info website.

Rates
State Pension (Contributory) payment from January 2009:

PRSI Contributions
Column 2: Rate per week
Column 3: Increase for a Qualified Adult (under 66)
Column 4: Increase for a Qualified Adult (aged 66 and over)

48 or over €230.30 €153.50 €206.30
20 – 47 €225.80 €153.50 €206.30
15 – 19 €172.70 €115.10* €154.70*
10 – 14 €115.20 €76.80* €103.20*

€230.30 a week. Which is a grand total €11975.60 per annum. There are some additional benefits available (although those such as free travel look to be on shaky ground). But that is the size of it. Now, I don’t wish to be morbid, but say taking these figures from the CSO to be more or less applicable for today, the average lifespan of a male is 75.1, and more happily for females 80.3 (or perhaps not, dependent on quality of life in our wonderful welfare state). So let’s round it up to 76 and 81 and you’ll see that the overall average expenditure on a state pension for a man is €119,756 and for a woman is €179,634. http://www.cso.ie/newsevents/pr_lifetable0103.htm

Let’s consider once more that presumably non-contributory pension Mr. Fingelton received. We know that it is open to tax relief at the higher rate, but I’d be hesitant about suggesting that over 40% of the sum was effectively paid for by the state. So let’s take Róisín Shorthall’s less categorical ‘several millions’. Indeed, let’s take

It’s not that simple, there are other factors, but nor is it that difficult either. If we take a nominal figure, say €2 million we can see the remarkable fact that you could fund the average state expenditure for a male pension 16 times in that figure and a female pension 11 times. But of course that isn’t the figure that tax relief was availed on. It is probably a quantity many times higher. And the overall €27.6 million is the equal of 153 women and 230 mens pensions.

Now 230:1 strikes me as excessive. Actually 23:1 strikes me as excessive.

Still, there are always those who will defend this situation, or attempt to make it seem less stark than it is.
Step forward:

Finance Minister Brian Lenihan [who] last night revealed the pension pot of Irish Nationwide boss Michael Fingleton is “substantially less” than initially thought.

Mr Lenihan signalled Mr Fingleton’s pension plan had been hit by the dive in stock markets values.

Mr Fingleton (71) sparked an avalanche of controversy this week after it was revealed he would receive a €27.6m payment when he steps down from the helm after 38 years’ service.

And it was revealed €7m of this could be tax-free because private sector workers can take 25pc of their pension tax-free when they retire.

But last night Mr Lenihan attempted to dampen down the controversy by suggesting it had been hit hard in the wake of plummeting stocks.

He’s been hit hard? He has? Hit hard is working your ass off across a lifetime to spend your last decade eking out an existence on a basic of €230. That’s the living definition of ‘hit hard’, and with all due respect to the Minister, to even approach the term, let alone use it, indicates a near Olympian detachment from the reality that perhaps the majority of people in the state that he is a representative of live in. And remember, Lenihan, so it is said, is part of the more leftish inclined group within FF.

Menwhile note the €7million at 25pc. I’m trying to work out whether that is inclusive or exclusive but either way taking recourse in my trusty Excel spreadsheet it will hardly be a surprise to see that 39 women and 58 men could be funded in their pensions.

Is any man or woman worth that? Is the task they undertake of such epic proportions that they, of necessity, should have sums that stagger the imagination passed across to them. And what of the opposite dynamic. How does such generosity and self-indulgence operate in terms of diminishing those of us who will never ever come close to this sort of wealth? What does it say about how little everyone else is valued – their lives, their experiences, their worth as people?

A final insult to add to the injury?

It is believed that even if the fund has dropped to €15m because of the crash in equity values, Mr Fingleton could take €3.75m out of it tax-free.

Jesus wept.

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Comments»

1. Tortoise - March 28, 2009

The pension issue will cause war. During the boom the whole issue stayed (or was kept) below the radar. As a long serving public sector worker I have been grateful for my pension, looked forward to it all my life, made decisions to defer gratification–not taking a more lucrative private sector job when I could–crossed my fingers and kept quiet about it. Now the private pension AVCs I was paying into have gone from 50 thousand to five, plus my gratuity will now be taxed I fear. I was going to use AVCs and gratuity to buy back missing years so I would have a pension I could live on. But imagine how irrelevant (and privileged) this sounds to a person who has worked all their life and has nothing, or next to nothing to cushion their old age, which is the fate of a lot of ordinary workers. Those who did what they were told and joined a private pension scheme now find that it was just another “financial instrument”, a scam, nothing to do with them or their future security. Might as well have put it on a horse. The “dive in stock market values” will be much clearer as a concept to them than it is to Mr F. Many small time earners have lost everything. And of course, as Ms Shorthall points out a worker on 20,000 is being “invited” to share the pain. (I note with some anger that a certain cohort of high rolling workers were “invited” to take a pay cut. Few did. Another cohort had it imposed on them although the word “invited” was still used.) The Fingletons of this world are a living symbol of the terrible inequalities copperfastened in the Tiger years. Such obscene sums of money offered to one individual do indeed diminish ordinary people, mock their lifelong labour and raise key questions about the values of our society. But the anger is growing, and the pension issue could be its focal point.

2. Crocodile - March 28, 2009

Well put by the aptly-named Tortoise.Now that the hares have lost the race, they’re tearing up the rule book and calling for a stewards’ inquiry – with themselves as the stewards.
Several years ago I asked a financially-savvy friend what the implications of globalisation were for me. He laughed and said ‘By the time you get to that pension you think about every day, it will be gone. Competitiveness and pensions don’t go together.’ Will Hutton, among others, has pointed out that the obsession with short-term shareholder value leaves no room for pensions; it’s an ideal set-up for bonus culture.
Apart from Tortoise’s examples, there’s another poignant figure: the bloke who bought an apartment in Ongar or Rochfortbridge or Budapest 5 years ago and has spent the time since then saying, to anyone who’ll listen: ‘I’m looking after my own pension. Bricks and mortar.’

3. alastair - April 1, 2009

I learned this week that I’ll be subject to the public pension levy too – for the odd spot of lecturing that I do for an academic institute. Now – my income from this work is minimal (to say the least), and the levy won’t change that fact by much, but I have to laugh at the principle involved – as someone who MIGHT, in the future, move into a public sector career, I’ll need to pay a levy for that POSSIBLE future pension benefit. Hard cash payable now (or next payment statement in any case), for a pension scheme that isn’t applicable to me, much as I’d love to hop on board that gravy train. Makes as much sense as anything else going on these days I guess.

4. Tony - April 20, 2009

I see the board of Irish Nationwide are changing the rules so no one is out on there ear. They are trying to increase the number of Directors from 8 to10 so nobody has to go so the Gov. appointed members can move in (I wonder if I can apply?)

5. WorldbyStorm - April 20, 2009

Ah for God’s sake. This messing around is amazing. What are Irish Nationwide like?


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