Pension reform is essential, sooner rather than later
Aug 18, 2016
One of the biggest risks to the future prosperity of our citizens is a lack of adequate pension provision amongst private sector workers. Recent studies predict that current contributions to the State pension fund will not be sufficient to pay the levels of benefits necessary for an adequate standard of living for future retirees.
Figures released by the Central Statistics Office in May 2016 show that the number of workers who had a pension in the fourth quarter of 2015 fell to 46.7% compared with 51.2% in the same quarter in 2009. Earlier this week, the Head of the Pension Authority, David Begg, warned that numbers of people in a pension scheme was falling, while many of those who were in schemes could only expect a small retirement income.
The number of people saving in a pension scheme, sometimes called a supplementary pension, has fallen since the financial collapse. Additionally, the proportion of workers who expected the state pension to be their main source of income rose from 26% in 2009 to 36% in 2015. When public sector and semi-state workers are excluded, the proportion of private sector workers belonging to a pension scheme falls to 33% when compared with 37% in 2009. This reduction in the proportion of workers belonging to pension schemes comes as a time when the number of over 65s in Ireland is expected to grow significantly. The CSO is projecting that the number of people aged between 20 and 64 will increase by only 6pc to 2.96 million by 2046 but that the number of over-65s will almost treble to 1.41 million.
Unless action is taken now, we will be unable to fund our future pension requirements. As part of our submission on Budget 2017, we have called for a number of reforms to be introduced so as to encourage more workers to enrol in private sector pensions. We have also called on the Government to review how funding for public sector pensions is delivered.
Summary of Recommendations:
- Regulations governing pensions must be made flexible to allow workers to gradually transition into full retirement allowing part time work or job sharing.
- Incentives should be implemented to encourage enrolment in private sector pensions; a subsidy rather than a tax relief may be more attractive to workers.
- The Government must ensure that it is as administratively easy and cost effective as possible for SMEs and entrepreneurs to establish or participate in pension schemes.
- Recognising that the current system is inadequate, a sustainable system for the funding of public sector pensions must also be delivered