Wednesday 21 February 2018

Pensions scheme for newborn babies 'not realistic'

Charlie Weston Personal Finance Editor

Saving 'from cradle' plan fine in theory but not in Ireland, says funds chief

PROPOSALS that newborn babies should be included in retirement saving schemes in an attempt to solve the growing pension crisis have been questioned.

A British think-tank said that all babies should be allocated a joint savings and pension account when they are born.

The accounts, which could be run through post offices, would give babies a "seamless vehicle" in which to save money from the cradle to the grave, the Centre for Policy Studies recommended.

But the Irish Association of Pension Funds (IAPF) said that although the idea would work in theory, it may not work in practice in this country.

Jerry Moriarty, chief of the IAPF, said the idea of providing pensions for babies was first proposed by the State's National Pensions Review in 2005.

The big union SIPTU has been a strong advocate of pensions for babies.

Mr Moriarty said: "It makes a lot of sense in theory but there are a lot of practical issues. In theory, the earlier people start saving, the more money they will accumulate over time and it could help generate a savings culture."

Merit

But he said that in practice, it is likely that those who are saving on behalf of their children/ grandchildren are those can afford to do this.

Around half of the workforce do not currently save for their own retirement. This means that it is unlikely they would save for their children's retirement.

However, a general savings schemes for babies and children would have merit.

"It might make more sense just to have a general savings vehicle for children which could be used for college fees, property purchase or retirement saving," Mr Moriarty said.

Those saving for a pension have been hit by lower tax reliefs, higher annuity costs which make it more expensive to buy a pension at retirement, and the threatened closure of a number of defined benefit schemes because of tough new rules and poor investment returns.

Irish Independent

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