It’s a great honour to have been invited to your annual dinner. It’s interesting to note that the Irish Association of Pension Funds is as old as our membership of the EU. In 1973 you were established as a key voice for the Irish pension industry and we as a country joined the then EEC. We have both come a long way since then.
Last May I was elected to the European Parliament having spent nearly 4 years as Minister of State at the Dept of Finance. It’s been a roller coaster ride, for me and for Europe over that time. I am absolutely certain about one thing however. It is in Ireland´s interest that we remain committed to the European project, committed to the Eurozone and committed to further integration.
Michael Noonan once told me that European decision making is a bit like looking at the progress of the Mississippi River. It takes a long time. There are also many dangerous animals close to the river – ready to pounce at any time. So politics in Ireland and in Europe are pretty much the same.
I think it´s safe to say that navigating deep and dangerous waters and being patient are crucial qualities for any first time MEP.
I’m the only Irish member of the Parliaments powerful Economic and Monetary Affairs Committee. Given that 70% of all financial legislation across Europe is by way of co decision making between the EU parliament and the Council, it’s crucial that we as a small country are represented. The Irish Association of Pension Funds understands the importance of EU decision making because you are members of Pensions Europe – a European wide voice for the pensions industry.
Financial services matter to Ireland. Be it in the area of pensions or money markets or the emerging capital market, we have developed a well-recognised financial service industry that is the envy of the EU. We need good outcomes from the EU institutions on all of the files that come before us.
We don’t need over regulation, but rather better regulation. Better
for consumers and clearer for Industry. I know this is a concern for the IAPF and we need to work together to make sure the rules for everyone are understood and make sense.
I’d like to say something about pensions. The CSO published a major study in 2013 Population and Labour Force Projections 2016 – 2046. The study looked at various demographic trends over the next 30 years. The study attracted only a minor level of passing interest at the time. However, it did contain some figures which should be a wake-up call for us all. The figures are of particular interest to the Pensions Industry.
In Ireland currently there are approximately 600,000 people over the age of 65. According to the CSO study in 30 years’ time, that figure is likely to be close to 1.5 million; that’s an increase of over 150%.
Secondly it’s expected that there will also be a dramatic increase in the number of people over the age of 80. At the moment there is about 150,000 people over 80, by 2046 the study expects that 450,000 people over 80 years of age. Whatever the numbers are – and I hope we´re all around to see it – one thing is clear – a pension time bomb is heading in our direction. This is not an Irish problem alone – it’s European.
The electoral cycle should not divert us from the need to provide for the future. Irish politics is not good at planning or providing for the long term. We need an urgent national debate about pensions and how to fund them. The vast majority of people are dependent on the state for their pension into the future. We should not remain in denial regarding the scale of the pension challenge which lies ahead.
The former Minister for Finance Charlie McCreevy deserves great credit in my view for establishing the National Pension Reserve Fund. That decision was the right decision. In good times money was put aside for pensions. It became Irelands very own rainy day fund. Unfortunately as the crisis deepened it became necessary to raid the fund to shore up government finances. Our situation was helped by having the fund in place when the crises hit.
A debate is now well overdue on the issue of funding future pension liabilities. While €7billion has been provided from the NPFR to kick start the Strategic Investment Fund, we also need to get back to the good housekeeping habit of putting aside every year funds for future pension provision.
I´m also suggesting that an attempt should be made to reach an all-party agreement on this issue in advance of the general election. Setting aside resources now will help meet rapidly rising pension payments into the future.
I want to say something tonight about Ireland and Europe. As a country we have travelled a very difficult road since the start of this financial crisis. Europe and Ireland have emerged from the crisis stronger and better equipped. While many challenges lie ahead, and risks still exist, for the first time since 2008, this year 2015 is the first year when all EU countries are expecting to grow.
It’s taken a long time – but I believe that this year we are well positioned to finally leave the crisis behind us.
Successful small open economies have to box clever. This country is Northern European in its economic make up. Lots of very successful worldwide businesses locate here because of what we offer. Ireland is one of the best place´s in the world to do business. From financial services to IT to pharma to agri foods we have a diverse economy. We are an economy that went from one million to two million employed over two decades. No other western European country managed to double its work force in such a short time.
I want to say something about Ireland. And I’ve a question. Why do we in Ireland constantly prefer failure over success? What’s this ongoing fascination in comparing ourselves to Greece? Why do we belittle the progress that has been made thanks to the hard work of the Irish people?
Look at how far we have come in 4 years. In 2011 Irish 10 year bond yields were 14% and nobody was prepared to lend us money. Yesterday, Irish 10 year bond yields fell below 1% for the first time.
The mandate given to the government in 2011 was to renegotiate the existing deal. The situation we face today is infinitely better than 2011. The ongoing renegotiation between 2011 and now has dramatically improved the public finance position and put the country on the path to a sustainable recovery.
Greece went into a bailout programme a year earlier than Ireland but which country is now in a better position? The facts speak for themselves.
No private investor is prepared to lend Greece any money. Ireland is out of the bailout programme and well on the road to recovery. Greece is still mired in a very difficult economic situation, completely dependent on troika money to keep the country afloat. Many Greek people continue to suffer extreme hardship. Unemployment is more than 25%. Is that the road that the hard left and hard right would have us follow?
In contrast, Ireland is in a much better place. Unemployment continues to fall. A further 40,000 jobs are expected to be added to the economy during 2015. We all know that a decent job is the best pathway out of poverty. Falling prices, tax cuts, welfare increase and some wage increases mean that practically every group in society will feel a modest improvement in their circumstances this year.
With a stable political framework and the wind at our backs the Irish economy could have annual growth rates of 3% or higher for the next decade. At current levels of job creation, unemployment will fall close to 6% or lower by 2018. By any measure such an outcome would be an exceptional achievement.
We will need high levels of growth and high levels of employment to meet future social demands, particularly a rapidly ageing population. Something which I know your industry has strong views on.
Rather than Ireland following Greece, Greece should follow Ireland’s experience of renegotiating. Everything must be done to help the Greek people. Greece must not become however the playground for student princes from Western Europe to bring on their own version of class warfare.
Finally I´ve been recently appointed as the lead rapporteur on the IORP file or in long version – the Institutions for Occupational Retirement Provision. This will come before the Parliament over the coming months. The first IORP Directive was adopted 12 years ago – in 2003. European Council came to a general agreement in December last year and now the Parliament has to come to a position on it.
This Directive is all about opening up the Internal Market and allowing people to safely transfer their occupational pension schemes from one EU Member State to another.
The financial crisis had a significant impact on pension schemes. Many schemes lost large amounts during the crisis. There has also been a decline in the number of Defined Benefit schemes with a significant shift towards Defined Contribution coverage in the years since IORPS 1 was introduced. This focussed attention on the need for stricter governance of pension schemes and also to focus on issues relating to Defined Contribution schemes, which did not feature strongly in the current IORPS 1 Directive.
My job as rapporteur in Parliament for this file will be to ensure that rules are in place for better governance in occupational pensions, that we promote better cross-border activity of IORPs, to improve transparency of information around pension transfers and that we bring in the right tools for effective supervision.
I know there are some concerns about the potential introduction of stringent solvency requirements for IORPS but they do not form a part of the proposal. My view is that imposing a completely ‘one-size fits all’ approach is not the right solution to this issue. We don’t want to see further costs on EU businesses. And we also must respect the diverse approach to this issue member state by member state. This will be my approach in attempting to negotiate a good outcome. Needless to say I will be working with all groups who have an interest in this file.