"Keep the bone and the dog'll follow you" was, for generations, the pension policy of most Irish farmers. In other words, hold onto your land and your relatives or neighbours who hope to inherit will care for you in your old age. Not so any more. As farms become bigger and farmers have to do a great deal of tax planning - coupled with the need to attract a son or daughter into farming, where before there was sibling rivalry for the land - many farmers are beginning to see the need to plan for their retirement.
That is the theory. In practice, only 13 per cent of the 143,000 farmers in the State have provided for retirement planning through recognised pension schemes.
Why? Well, farmers are put off planning for retirement because of income constraints: some years they make good money, other years are a disaster. Most farmers want to plough the money back into the farm rather than invest in a pension fund. Yet, an examination of the age profile of farmers indicates that pensions are something farmers in the Republic need to acquire - urgently. More than 32,000 farmers are aged between 55 and 64, a further 30,000 are older than 65 and only 16,000 are under 35.
An Economic and Social Research Institute survey conducted in 1995 showed the poor pension coverage of farmers compared with other sectors. Thirty-nine per cent of self employed people outside agriculture had pensions, while 38 per cent of those employed in the private sector and 83 per cent of those in the public sector were covered. The Pensions Board believes that areas of relative strength and weakness in coverage appear to be the same five years on.
Of course, many farmers never retire and die in harness. The present situation for the 87 per cent of farmers without a recognised company or private pension scheme is that they can get either a State pension at the age of 66 years or, if they retire from farming completely, they can get an EU pension after they reach the age of 55 years and before 70 years.
The State pension of £85.50 (€108.64) a week if under 80 years and £90.50 at over 80 (to rise to £95.50 and £100.50, respectively, in April) is the non-contributory Old Age Pension for self-employed people. This pension is not means tested. The EU early retirement scheme was introduced in 1994 as part of the first National Development Plan and the first phase is coming to an end. The next phase runs until 2006. Under this scheme, farmers can get a pension of £10,000 a year, provided they retire from farming completely and sell or lease the farm to a young, trained, farmer or pass it on to a son or daughter, who also must be a trained farmer. It runs for a maximum of 10 years and the maximum age to which this pension will be paid is 70 years. To date, 8,500 farmers have availed of this pension.
The 13 per cent figure for pension provision is "outrageous", according to Mr Brendan Spring, chief executive of FBD Life, traditionally the farmers' insurance company. The Irish Farmers Association (IFA), which is closely linked to FBD, wants the company to sell more pensions to farmers. But Mr Spring says: "There's only so much the IFA can do and we can only do so much. But that figure of 13 per cent will rise significantly as the demographic situation changes with farms getting bigger and farmers getting older.
"Farming is a way of life, a vocation. Most people tend to retire or scale down at some stage. Farmers work and work and never scale down. Another reason is farmers didn't traditionally pay tax: there isn't much point in putting money into a fund where you can get a refund on the money going in if you're not paying tax. The money they put into a pension fund reduces their tax bill. The fund is tax-exempt and they can get a portion back - whenever they decide they want to take retirement benefits in the form of tax-free cash," he explains.
All insurance companies have self-employed pension schemes available but, in the case of farmers, FBD has devised special plans in consultation with the IFA. Mr Spring says it is the biggest group self-employed scheme in the State, with a fund of £150 million. (The second largest, he says, is the one FBD has devised for the Irish Vintners' Federation.)
"We have four insurance companies in partnership to develop a scheme which gives the same benefit to an individual farmer as to someone in a large company like Aer Lingus. We have a standard pension product and we basically give the members a choice of four funds they can choose from. Investment choice becomes important when there is a huge divergence of ages: the young aggressive farmer who wants actively managed funds or the conservative farmer who wants guarantees.
"We can take them in at any time, the younger the better. There are no health implications. It's only a matter of how long you can take retirement benefits. Seventy-five years is the limit. We just treat it as an investment rather than insurance policy.
"If you pay £100 a month, in the first year, you might get 92 per cent of that invested. Thereafter it would be 100 per cent invested. If they came with a lump sum, the net amount invested would be something around 98 to 98.5 per cent, on average."
Coillte, the State forestry company, has become involved in the pension and investment fund areas with FBD. "Coillte uses it as a marketing tool," he explains. For example, if Coillte is paying a farmer £5,000 a year - which is not treated as income earned for tax purposes - for land over a 20-year period, if the farmer puts that £5,000 annually into the FBD investment fund, he or she will be given a figure for what it will be worth at the end of 20 years. If a farmer has sufficient allowances, he or she should opt for the pension fund; if the tax allowances are insufficient, the option should be the investment fund, which does not give tax relief but provides greater flexibility.
