Mixed reactions to pension plan

There was mixed reaction from the pensions industry yesterday to the proposals of the National Pensions Review.

A recommendation to allow people to work beyond the existing retirement age of 65 in order to boost eventual pension payments was welcomed while the failure to conclusively rule out mandatory pension savings was generally condemned.

There was also concern that the review had concentrated overly on reaching the Government target of ensuring that 70 per cent of people over 30 have some pension coverage over and above the State pension while ignoring the issue of whether such supplementary pension benefits were adequate.

Assurer Standard Life said its recent national survey of 1,000 consumers found that 44 per cent of all working adults would be prepared to work until 70 if the State pension made it attractive to do so.

The Pensions Board review recommends that people who decide not to accept the State pension at 65 would receive a one-third higher pension when they reach 70.

"As long as this was voluntary rather than compulsory our survey suggests broad popular support for the flexibility to work beyond 65," Michael Leahy, Standard Life chief executive, said.

The Cabinet which discussed the report at last week's meeting will further consider this and other recommendations contained in the review of national pensions policy which was brought forward by a year. Minister for Social and Family Affairs Séamus Brennan decided the Government's Personal Retirement Savings Plan initiative was "failing to mobilise the general public and employers to start contributing to pensions in the numbers required to achieve our overall targets in any sort of reasonable timescale".

The Pension Board would not comment yesterday on the recommendations until after the Government has made its content public.

The review, seen by The Irish Times, was carried out by a steering committee of the board chaired by Tom Finlay. It includes representatives from the social partners, relevant Government departments and some members with specific expertise.

The group was accused last night of "concentrating on the wrong issue". Benefits consultants Watson Wyatt said: "It is all very well seeing that everyone has a pension but it is not worth a damn if that pension is not adequate". "It's as if the political imperative is to improve coverage statistics above all else," said Ray McKenna, managing consultant at Watson Wyatt.

Mr McKenna's position was reinforced by a report from the Society of Actuaries in Ireland which indicates that just one-third of people paying into a defined contribution pension scheme - where the final pension depends on the contributions made and their investment performance - were contributing enough to yield a pension equal to two-thirds of final salary.

Mr McKenna also said he was surprised the report hadn't come down "one way or the other" on the issue of mandatory pensions "particularly as it has been flagged over the summer as the central issue that the minister wanted addressed".

"While we are glad there is no recommendation in favour of a mandatory regime, we harbour continuing concerns that it may yet emerge," Mr McKenna said.

He said the example of Australia, widely cited as an example of the success of such a regime, provided evidence of precisely why compulsion should not be introduced into pensions savings.

"Defined benefit pension schemes in Australia were widely scrapped in favour of the (lower level) mandatory defined contribution scheme that was introduced," Mr McKenna said, who added that such schemes "simply lack focus".