Rationing financial certainty

Joseph O’Dea 8 June 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)

The material, content and views in the following presentation are those of the presenter.

Sort of.

Beware the green-eyed monster!

What do we want retired citizens to experience in 50

years’ time?

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

Making a change?

Source: Wikipedia

All that glistens………

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Financial certainty

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Source: William Beem Photography

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!

A Good Start!

How much security do we want to provide?

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.

Nicholas Flamel