THE Irish Association of Pension Funds has called for a sharp increase in the State pension, urging the Government to add around £10 million a year to the fund for the next 40 years. Such a top up, it states, would bring the State pension for a single person to around £100 a week and would particularly address the concerns of the lower paid.

However, the association, which represents the pensions industry in Ireland, has ruled out any move towards introducing a mandatory pension, but is recommending the introduction of a simple pensions product to encourage more people to save for their retirement.

In its submission to the Pensions Board, the IAPF argues that, while its proposals incur a greater cost to the State, it is nonetheless affordable and represents only a modest increase in the overall funding of State pensions.

According to its figures, the proposed increase would bring the cost of funding State pensions up from 3.1 per cent of Gross Domestic Product to around 4.2 per cent or £400 million over 40 years. The IAPF chairman Mr Paul O'Faherty, stressed yesterday that the increase in the State pension would not require "any significant" increase in PRSI.

As State pensions in Ireland are currently lower that those provided in other EU states, the IAPF is arguing that pensions should be linked to increases in wages rather than to the rate of inflation. Its proposed increases are based on raising the State pension to around 35 per cent of average earnings.

"Improving the State pension will ensure an adequate income for everyone and we believe this is a very cost effective way of doing it," Mr O'Faherty said.

The IAPF has considered the merits of bringing in mandatory pensions, but believes the "sledgehammer" approach is unnecessary. "We already have a State pension system. It makes no sense to build a second tier mandatory pension scheme on top of that."

The association's most radical proposal to the Pensions Board is its call for the introduction of US style Personal Retirement Accounts. The accounts, which could be opened at any approved bank or building society would offer a simpler pensions package to investors and make it more attractive for them to provide for their retirement.

The PRA, it suggests, would be particularly attractive for workers in small companies and for the self employed, giving them greater flexibility and control over their pensions.