Rationing financial certainty Joseph O’Dea 8 June 2015
Dec 31, 2015
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Here lies the body of Johnny O’Day… ….Who died preserving his right of way!
He was right, dead right as he sailed along…. …..But he’s just as dead as if he were wrong!
(No relation)
Which would you rather have?
A guaranteed pension of €12,000
A variable pension with an expected level of €15,000 with:
i. 90% confidence of being above €12kii. 10% chance of falling to €10k
(minimum)What if this applied only to pension
above the State pension?
What is the current reality? Can we improve it?
What’s happening?
Market Risk
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Year # Schemes # Actives
2012 933 190,000
2014 703 137,000Source: The Pensions Authority
Pensioners
Actives/DPs
Wind-up
Annuity
Macro consistency of funding requirements
Population of Eurozone 335m (2014)
Eurozone sovereign debt €7trnAAA/AA €Sovereign debt €4.5trn
Population over age 65 c. 20% (67m)
c. €100k per pensioner.
c. €60k per pensioner of AAA/AASources: Wikipedia; iBoxx; World Bank
Who owns $60+ Trillion Of Global Assets?
Sources: Morgan Stanley Research, Towers Watson, ADIA, BCG, CIC, EFAMA, Future Fund, GIC, ICI, Norges, Simfund, Yale as of Oct. 8, 2013
DB pension liabilities in Ireland
• DB assets €52bn
• AAA funded deficit = (?) €25bn
• €180,000 per DB active
It is (/Is it?) imperative that we accommodate (and/or promote) risk
taking – with equitable and reasonable allocation of financial certainty!
This is not the solution, but…
Or, (say) make the first €200p.a. pension accrued each year
subject to high level of security – with risk
attaching to the balance.