A NEW model of State pension provision which would see the State running a defined contribution scheme for private pensions would result in a sharp reduction in administration costs, an ESRI conference on pension policy heard yesterday.

Attendees were told that, according to a study in the United Kingdom, the recently introduced British state-run defined contribution scheme National Employment Savings Trust will lead to an improvement in people’s welfare.

Such a scheme will also lead to reduced management costs – which is seen as a disincentive to people choosing to invest in private pensions. According to Justin van de Ven of the UK’s National Institute of Economic and Social Research management costs could be reduced from 1 to 1.5 per cent to 0.3 per cent.

A study of the implications of such a scheme in Ireland is being undertaken by the Economic and Social Research Institute. The introduction of some kind of auto-enrolment scheme was mooted in the National Pensions Framework.

The ESRI’s Tim Callan said the new framework for pension policy analysis being researched by the institute represents a move away from the traditional “snapshot” approach to pensions analysis, towards a more “dynamic”, long-term approach which takes into account how people’s employment and pension savings evolve over their life course. Gerard Hughes of Trinity College, Dublin defended his recommendation that tax relief on pensions should be calculated at the standard rate of tax.