A Government-sponsored report said today that a more generous State pension combined with mandatory top-ups by workers would be the best option in averting a pensions crisis.
The Pensions Board report, which was requested by Minister for Social and Family Affairs Seamus
Pensions Board report, which was requested by Minister for Social and Family Affairs Seamus Brennan
Brennan, was mandated to evaluate options for reform of the pensions system, including mandatory pensions.
The reports concludes that the best option for Ireland to address the challenge of ageing working population would be a hybrid system based on increased State and personal contributions amounting to 15 per cent of average earnings.
The report specifically recommends that the contributory State pension be increased from 33 per cent to 40 per cent of average industrial earnings over ten years until 2016 or similar period.
In addition, it is recommended that a supplementary system called Special Savings for Retirement be set up for all employees who are not members of occupational schemes or do not have sufficient supplementary savings.
However the report's recommendations are already in trouble as the board member nominated by the Minister for Finance believes that the costs of such a scheme would make the scheme unworkable.
The report found that mandatory pensions such as those in New Zealand and Australia would be unsuitable for Ireland due the additional cost of the schemes that would act as a tax on labour and further erode competitiveness.
The other option of increasing the State pension to 50 per cent of average earnings was ruled out on account of the cost to the Exchequer.
Over 900,000 people, almost half the country's workforce, have no private pension cover and risk a sharp fall in income at retirement age if the State pension is their only means of support.
The public finance will come under increasing pressure to meet current levels of pension provision as the ranks of the retired will swell from a current level of 464,000 to nearly one million by 2030.
The public cost of the State pension for this group will rise from 13 per cent of GNP to over 17 per cent.
The Government will launch a public debate on pensions policy with the publication of a Green Paper that was agreed as part of the Towards 2016 partnership agreement.
The Green Paper is expected to be published within the next 12 months.