The Greying Brigade

Jan 27, 2020

Business Post 26 January 2020

There isn't a politician in the country who isn't afraid of the “grey lobby”.  Successive governments have found to their cost that anything which tampers with the benefits being enjoyed by the retired carries a guarantee of protest.

So why all the furore about pensions in the current election campaign?  After all, the grey vote is not bothered because they have their pensions already.  The state retirement age moving to 68 isn’t even a new announcement.   Upping the age at which the state pension kicks in has been known about for a decade.  It wasn’t even the work of the current government but of the previous Fine Gael/Labour coalition government.  It's not the usual grey brigade that's affected – it is the greying brigade.

The greying brigade - people born in the 1960s and early 1970s - have not done particularly well from the policies of successive governments.  Many of them first came onto the jobs market during the 1980s when jobs were scarce and inflation was rampant.  In recent years we have almost forgotten what inflation is, but in 1984 for instance, inflation ran at somewhere in the order of 8%.  The State responded to that recession by taxing everyone virtually out of existence. 

During the 1980s the corporation tax rate was 50%, the standard rate of VAT hit 35% and the marginal rate of tax and PRSI in 1985 for workers on modest wages was 73%.  If you went to a bank looking for a mortgage, you would be solemnly told (if you were lucky) that the natural cost of money was 10%.  Yet the greying brigade, those late baby boomers and early generation Xers, hung on.

Things began to get a little better in the 1990s.  Largesse flowed from Brussels, and the economy entered into a period of recovery.  But property prices began to spiral with house prices in the late 1990s increasing by 25% per annum.  That in turn lead to increases in Stamp Duty.  Just as this generation were having kids of their own, the tax relief for children in the family was abolished.  Still the greying brigade hung on.

With increasing prosperity in the 2000s, money was pushed into the National Pension Reserve Fund.  This was the original rainy day fund designed to shelter the Exchequer and citizens alike from the cold winds of an ageing demographic.  That pot of money evaporated in the financial crash and a large chunk of it was used to bail out the banks.  Certainly, the late baby boomers and the early generation Xers didn't see it even though it was their taxes that had largely built it up. 

No sooner did this blighted generation get to the stage when their own children might be leaving school and contemplating careers, or perhaps a further term in college, than the great recession hit in 2008.  Taxes and unemployment levels soared again, and many saw their children emigrate and their own jobs disappear.

And now, just when they think things might be getting a little better, this same generation is being told that their retirement date will be pushed out time and time again.  Is it any wonder the greying brigade are upset?  The wonder is that they have not begun protesting before.

While many people are cynical about elections and election campaigns, they serve to focus the minds of citizens on the way they are being governed.  The hustings prompt an authentic examination of current affairs, where politicians have a real interest in saying and doing not just the right thing but the electable thing.  For a few weeks the court of public opinion is less driven by the usual pundits and keyboard warriors, none of whom foresaw how sensitive the retirement age issue would become. 

Delaying the pension age was a money-saving ruse.  It is now becoming clear that it is a ruse which is not going to work.  Transitional payments and interim arrangements will eat into the savings in the state coffers, which the extension of the pension age was designed to achieve in the first place.  Fianna Fail talk of a comprehensive review.  Fine Gael promises transitional payments for retirees at the same effective rate as the state pension.  Sinn Fein wants to reverse current policy entirely and bring back the retirement age of 65.  These all amount to the same thing.  They differ only in the grace of the political U-turn involved.

A pension is perhaps one of the most boring topics imaginable, except for those in immediate prospect of receiving one.  People who have had little or no interest in financial affairs all their working careers suddenly become pension gurus when their own retirement is looming.  The private sector seems increasingly conscious of how small the benefits are from their pension savings, as purchasing annuities on retirement simply doesn't cut it anymore because of the low yields on government gilts. 

Couple that with the disenchantment of the greying brigade towards government policy generally, after years of being in the wrong place at the wrong time.  A new lobby is emerging, of which our politicians would do well to be fearful.  Beware the greying brigade.

 

Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland