RETIREMENT may be just 10,20 or even 30 years away for many of us, but only those employees with defined benefit schemes - either from private or State employers, have any degree of certainty about the value of their pension income when retirement day comes.

The Irish Association of Pension Funds (IAPF), the umbrella group that represents the pensions industry and their fund managers is concerned that too many of us including some members of defined benefit schemes with short service - are going to experience a serious pension shortfall at retirement.

In an attempt to avoid this rude awakening the IAPF has come up with some radical proposals in its submission to the National Pensions Policy Initiative, which in turn will make recommendations later this year to Government about the state of pension provision in Ireland. As one of the most influential investment groups in the country the IAPF submission is expected to carry considerable weight with the Initiative group.

The IAPF has made three basic recommendations in its submission. They are:

. That the funding of State pensions is increased over the next five to 10 years to ensure that the State can provide its citizens with pensions that are the equivalent of about 35 per cent of National Average Earnings i.e. about £100 a week.

. That the State pension in the future be linked to increases in wages rather than inflation.

. That a new, more accessible type of personal pension, known as the Personal Retirement Account, be introduced.

Currently, State pensions represent just 26 per cent of average earnings for a single person (45 per cent for a married couple). To increase this amount to 35 per cent would require an increase in State pension funding from the 3.1 per cent currently devoted to it, to 4.2 per cent. The total cost of increasing the weekly pension to £100 would be £400 million, an amount the IAPF says could be funded at £10 million a year over 40 years.

The idea of linking any future improvement in State pensions to wage increases rather than inflation, is aimed at preventing any further erosion of the State pension: under the current arrangement of inflation-related increases, the State pension proposed by the IAPF (i.e. 35 per cent of Average Earnings) will, in 20 years time, decline to one worth just 20 per cent of earnings.

The most interesting proposal in the IAPF's submission is a radical rethinking of the private pension plan system.

Last year the ESRI published the findings of a major pension survey which suggested that pension provision averaged at 52 per cent of the adult population. The IAPF subsequently commissioned Lansdowne Market Research to do a survey of non-pension holders and found that when assets and investments like property and businesses were taken into account, the total retirement provision cover for the population is closer to 76 per cent.

This figure is significant in that it colours the sort of extra provision the State will need to make to meet an appropriate State retirement income.

Around 25 per cent of respondents admitted to having no pension provision whatsoever. These included the self-employed; employees whose employer does not have a scheme; people who entered the workforce late or returned to it after a lengthy interruption after many years raising a family. The affordability and complexity of personal pensions were cited as two of the main reasons for their lack of cover. Portability was another issue raised.

The proposed Personal Retirement Account (PRA) states the lAPF, would address all these issues:

. PRA's could be set up with any financial institution that meets the necessary criteria and not just life assurance companies. They would be personal to the contributor.

. The PRA contract would not change over the course of the person's working life (i.e. periods of self-employment, working for a private or State employer, etc.)

. The tax treatment would be the same as for existing pensions schemes, except that up to 50 per cent of the accumulated fund could be withdrawn tax-free at any time after age 50 to meet health related expenses or in the event of redundancy or severe financial hardship.

. Maximum contributions allowable, inclusive of contributions to other approved pensions plans, would be 30 per cent of taxable earnings with higher limits to those over 50 years of age. The Pensions Board would be given regulatory responsibility for the provision of PRA's.

The IAPF foresees the Personal Retirement Accounts, light on red tape, low on setting up and running costs and unburdened by complex Revenue requirements as eventually replacing the current personal pension plan system - including Additional Voluntary Contributions (AVCs) made by employees who need to top up their occupational schemes. For anyone who has ever lived in the US the new pensions sound remarkably like the ever-popular, Investment Retirement Accounts in which so many US citizens invest.

The adoption of the Personal Retirement Account would certainly shake up Irish pension providers whose products are inexplicable to most laymen, which can carry all sorts of hidden costs (which mainly pay for commissions and administrative overheads), and who mainly rely on a large force of intermediaries and brokers to promote and sell their products.

A simple-to-arrange, low-cost regime (in which an annual management fee is the main charge) would certainly not suit conventional brokers who rely strictly on commissions for their livelihoods. But there would still be a role for fee-based advisers, who would continue to offer comparative advice about different PRA fund performances as well as pension funding within a wider personal finance context.

Anyone interested in further information about the IAPF submission and survey - Irish Pensions at a Crossroads should contact the Association at (91) 661 2427.