Pensions 'should be simplified'
Published 22/04/2013 | 16:06
Ireland should make its pension system simpler and fairer so that everyone gets sufficient income for a decent standard of living in retirement, according to international advisers.
A report on the retirement time-bomb by the OECD think-tank found that the Government should put in place either a universal or a means-tested pension scheme, both topped up with a compulsory private pension.
And the advisers said that the retirement age of 68 should be revised to reflect growing life expectancy after 2028.
John Martin of OECD said the cost of pensions should be reduced: "Ireland needs to make its pension system more affordable in the long-term. With public finances under pressure and to avoid a rise in pensioner poverty, private pension coverage needs to be increased urgently."
The basic state pension is considered relatively generous at 35% of average earnings, second only to New Zealand, which explains Ireland's low pensioner poverty rate of 10% where the OECD average is 15%. The two countries are the only OECD nations with no mandatory retirement savings plan.
Among the advice to Government was that more people could be encouraged to stay in work if state pensions are cut or raised depending on how long you work for. It also said that the state benefit pension all contributions made should be honoured in the calculation of the pension benefit.
The current system of offering bigger savers bigger tax reliefs only benefits the most well-off, the report said. It added that a universal system would be funded by taxes and contributions at a flat-rate regardless of how long you work.
Age Action called on the Government to reassure people that their contributions and entitlements will be honoured. A spokesman said minimum supports, such as the suggested universal pension or a means-tested basic pension, must be at a sufficient level to keep people out of poverty.
"The reality is that options to enhance these payments, such a supplementary pension or income, may not exist for many low and medium income workers and pensioners," said the spokesman.
Business lobby group Ibec said now is the wrong time for a compulsory pension regime. Director Brendan McGinty said: "It's hard to imagine a worse time to introduce a compulsory savings scheme. Any increase in employment costs as a result of such a scheme would undermine job creation and prolong the unemployment crisis."