Charges for managing pensions adding to shortfall
Published 17/10/2011 | 05:00
CHARGES for managing pension schemes are too high and are contributing to the lack of pension coverage, the annual economists' conference in Kenmare was told.
Donal de Buitlear, director of the new Fiscal Policy Research Centre, and Don Thornhill, chairman of the National Competitiveness Council, proposed the establishment of a new National Savings Fund, in a paper, which would provide a personal account for every worker at much lower cost than current pension schemes.
Research has found that charges amount on average to 26pc of the pension 'pot', with smaller schemes having to pay 3.6pc of assets to the pension companies.
"At a minimum, there should be much greater transparency in relation to costs," the paper said.
Larger schemes pay as little as 0.32pc of assets. These disparities, and poor returns, have contributed to a situation where only one in five private sector workers in some sectors have pension coverage.
"Unless credible responses to the upcoming crisis are produced, there is a real risk of a potential inter-generational conflict between younger people concerned about issues such as tax burdens and the funding of child care and education, and older people worried about income sustainability and healthcare costs," the paper said.
They propose a national fund into which employers, employees, self-employed and farmers would make compulsory contributions, similar to the current PRSI system.
This would be used to fund a basic pension for all, while a second fund would have automatic, but voluntary, enrolment which would enable people to top up their basic pension.