Burton confirms plans for universal pension scheme
Minister for Social Protection Joan Burton has set out plans for a new universal pension scheme which will aim to ensure workers in the private sector have adequate pension cover in the future.
The scheme will come under the supervision of the National Treasury Mangement Agency and it is envisaged that workers will have to pro-actively opt-out of any new arrangement.
Ms Burton indicated that the proposed initiative would be beneficial particularly for people particularly on low and middle incomes, or those moving in and out of different jobs, who had very little opportunity to save for a traditional type pension with their employer.
“With an auto-enrolment scheme, they would be paying a fixed amount relative to their income, and the Government would also contribute to that," she said.
“That would mean that by the time they retire, they could look forward to a decent level of pension – the contributory social welfare-based retirement pension but also an additional amount of savings which would give them a bigger income in their retirement.”
However Ms Burton acknowledged that the measure could take several years to put in place.
“A critical issue for the country into the future [will be] how do we provide adequate pensions for people.
“At the moment, people have the State contributory old-age pension or the non-contributory pension, but for a lot of people, that’s not sufficient to give them the kind of retirement that they envisage.
“So we’re looking at what a lot of other countries have actually done so far, which is some form of automatic enrolment into a pension fund when people are in work, with contributions from the employee, the employer and the State itself, with a view to building up people’s entitlements in terms of pensions to a reasonable amount to provide for a decent and adequate retirement.
“As the economy recovers, I think there’s a very strong case with the kind of ageing population that we have in the country, where we’ve more older people living for longer, to say, is the contributory old-age pension enough?
“For a lot of people, while it’s relatively high by European levels… it’s not really sufficient for an adequate retirement.
“So the idea therefore is to give people a very strong opportunity to boost that, particularly people on low and middle incomes, and indeed people who at different stages might be in and out of work.
“They might be working part-time, they might be working for contract periods, but if they had a contributory pension via the State through an automatic saving-for-pension arrangement, over a long period of time, decades of their working life, they would build up additional entitlements.”
Asked whether it was the wrong time to place additional pressures on low to middle income earners, Ms Burton said: “I think… we have to look forward to a period where we’re no longer, as it were, as a country and as a society, completely transfixed by the banking crisis – when we will have got past that and when the economy will be in recovery and people’s incomes will be stronger.
“And at that point in time, it would make an awful lot of sense to have an auto-enrolment structure for Ireland.
“But it would be a couple of years down the track. We have the OECD looking at the whole of pension provision in Ireland at the moment and they’re due to report sometime towards the end of the first quarter next year.”