Behavioural economics and pensions

There was a fascinating paper published by the pensions institute in 2010 entitled ‘spend more today’ and it was about ways to encourage (or to use the economic vernacular ‘nudge’) people to take out pensions.

We realise that forty pages of technical reading may not be everybody’s cup of tea so here is the most brief synopsis we can offer you as an alternative. Just note that this isn’t what you ought to do per se, it is about how the system ought to work.

They put forward the idea of using ‘SPEEDOMETER‘ which stands for ‘Spending Optimally Throughout Retirement’, and the steps to take are as follows:

1: First make a plan, ideally with, but if necessary, without an advisor. This first point is of interest because we obviously think everybody should get advice when planning their pension, but upon reflection it’s equally true that a ‘start’, even with no advice is better than inaction and there is simple reason behind it.

Say you decided to start putting €200 a month into a pension, given that you might be …

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Pensions: Public versus Private – nobody wins

This article appeared in the Sun on Sunday on the 2nd of June 2013

Sometimes we hear how people in the public sector make more than the private sector, or that big private sector earners don’t pay enough tax. This is a simple divide and conquer strategy where the end game is to make us all less well off in order for the Government to hold on to more resources and then pay for things in a demonstration of their own largesse.

In every version of this script the State is the hero and the public and private sector take it in turns to be the greedy bad guys.

Much of welfare funding, including many aspects of pensions, isn’t just about figuring out the strategy for preventing poverty in the first place, or curing it long term, or about reducing poverty in the elderly. It’s about feeding the ego’s of policy makers while using other peoples money. And by demonstrating how they, as a third party, can make the world a better place because they are the anointed ones who …

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News of the World: Money Saving Expert

Our sister company Advisors.ie has been working with the Irish News of the World, presenting their ‘money saving expert’ piece every week since January.

This week we covered the area of pensions and the necessity of pension provision.

Currently there are just over four people working for every pensioner, it has been calculated that by 2036 that this may be as low as only two people working for every pensioner.

That would be a massive problem because it would mean that most of the taxes raised would be going toward provision for an ageing population.

The new issue is that we may find it causes a pincer on our public finances as we struggle to pay back the money we have borrowed from many sources such as the IMF and EU, this move towards a lower pensioner to worker ratio won’t just arrive magically in 2036 rather it will manifest over time and as people live longer it will reach a tipping …

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