Adequacy and fairness must be guiding principles of pensions debate
Issued : Wednesday 17 October, 2007
Statement by Roisin Shortall TD
Minister of State, Department of Health with responsibility for Primary Care
I welcome the publication today of the Green Paper on pensions. The government is correct not to be prescriptive at this stage and the whole idea of a Green Paper is to set out a range of options.
However, it is essential that the government does not use the promised consultative process to postpone further the deadlines for the decisions that have to be made. The debate about pensions has been going on for a decade and the scale of the problem will continue to mount unless it is brought to a prompt conclusion. The government should aim to have the negotiations concluded in time to bring specific proposals forward for Budget 2009.
The Labour Party accepts that this is a complex issue and that there are few simple solutions. However, we have to accept that the existing system is unfair in that the tax relief available for private pensions means that the more you earn, the more you benefit. The state spends about €3bn annually on the state pension system which covers virtually the entire population, but the same amount is provided in tax relief on private pensions which benefits only about half the population.
Any new pensions system must take account of the particular problems for women, who because of caring duties, often loose out in a private pensions system that is heavily dependent on private contributions. There needs to be some sort of credit system in place to cater for parents and other persons who take time out of work for caring duties in the home
We do not believe that the idea of a mandatory pension is the way to proceed. In broad terms the Labour Party favours a system of automatic pension deductions for all employees, with an opt-out option. Every employee would have an pension contribution made from the pay packet, but will have the option of signing a form indicating that they do not wish to make that contribution.
We must also take steps to ensure that contributors to any new pension system are not subject to unacceptable charges by private pension companies. At present people in private schemes can face charges of up to 5% and I would like to see the National Treasury Management Agency establish a basic scheme for which a fair, modest and transparent fee could be charged.
It is also essential that the state pension system should be maintained and improved. Despite the welcome improvement in state pensions over recent years, 20% of pensioners are still living in poverty. Ireland’s state pension, as a percentage of average salary is the second lowest in the OECD.
All parties at the recent general election committed to increasing the state pension to €300 per week. However, if this is to be done, there are serious questions about the wisdom of the government’s promise to cut 2% off employees PRSI contributions, as this will further run down the Social Insurance Fund at a time when the demands on it will increase.
