Thousands of workers face poverty in old age, Ictu warns

Hundreds of thousands of workers are facing a "poverty crisis" in old age, the Irish Congress of Trade Unions has warned, and has demanded Government engage with it on addressing the issue.

Fergus Whelan, pension policy expert with Ictu, said if the trade union movement was not consulted or did not have confidence in a new universal pension scheme, unions would oppose it.

Recent CSO figures show that fewer than half (47 per cent) of workers have private pensions.

This figure drops to below 40 per cent when private sector coverage is considered in isolation, meaning that more than half of working-age people will be reliant on the State pension only.

"We are in a situation where 50 per cent of defined benefit [DB] schemes have closed in recent years," Mr Whelan said, "and anyone in a defined contribution [DC] scheme won't know what their pension will be worth until the day they retire."

In addition, the State contributory and non-contributory pensions will become more difficult to fund as the number of older people increases between now and 2060.

There are currently 5.3 people of working age for every pensioner, but this ratio is expected to halve by 2060.

Auto-enrolment

Minister for Social Protection

Leo Varadkar

, has expressed concern about the looming crisis, saying he favours a universal auto-enrolment scheme such as the Kiwisaver in

New Zealand

.

Kiwisaver is both a retirement savings scheme and the state pension. Employer and employee pay into it, with an annual tax-credit contribution from the government.

It is locked in until the worker reaches 65, but can be accessed early in case of serious illness or financial hardship, moving abroad permanently, or buying a first home. Workers are automatically enrolled and must choose to opt out.

Ictu favours an Australian model, whereby employers and workers make compulsory superannuation contributions to a fund.

Workers may choose to forgo wage increases and instead have them paid into the fund. They are encouraged with tax credits.

There was “clearly a lot of background work” going on in the Department of Social Protection on a universal pension scheme, said Mr Whelan, but Ictu had not been involved.

Given the Irish "meltdown" in pension schemes under the regulatory oversight of the Pensions Authority, he said it would be "very difficult to force workers to pay into a pension scheme if it is being managed by the same people who ran DB schemes into the ground.

“They have to have confidence the schemes are being properly managed.”

Mr Whelan was concerned that those “in an inner circle” examining which model to follow were civil servants with a guaranteed pension, who “would not be affected” by whether it worked or not.

“If we don’t get satisfactory consultation and don’t feel we can have confidence [in the scheme], we will advise workers to oppose it,” he said.

The Pensions Authority, which regulates schemes and advises Government on policy, is consulting on reforms.

Submissions are invited until October 3rd, with a report expected by the end of the year.