Sandra McLellan
Question:438. Deputy Sandra McLellan asked the Minister for Social Protection if she will initiate pension reform; and if she will make a statement on the matter. [48688/12]
View answerTuesday, 6 November 2012
Questions (438)
Written answers
There are a number of significant challenges currently facing pensions systems across Europe and in Ireland. As the populations of most EU countries are aging, issues around pension sustainability and adequacy mean that effective retirement age and the need for longer working in particular have come to the fore. In Ireland, there are currently six people of working age for every pensioner and this ratio is expected to decrease to approximately two to one by 2050. People aged 65 years and over will account for a greater proportion of the population while the proportion of working age is expected to decline. People are living longer with healthier lives and growing numbers of people want to work, or may need to work beyond State pension age. This has obvious and significant implications in relation to the future costs of State pension provision. Therefore, the task of financing increasing pensions will fall to a diminishing share of the population.
With these challenges and opportunities in mind, earlier this year, the Government asked the OECD to examine Ireland’s overall pension policy in light of the economic downturn and to ensure that it meets the needs of future generations. The review, which began in April of this year, encompasses the totality of pension provision in Ireland i.e. state, private, occupational and public sector. The review takes account of the Programme for Government commitments in the pensions area, including tax reliefs and the commitment to cap taxpayers’ subsidies for pension schemes, (including politicians’ pension schemes), that deliver income in retirement of more than €60,000. The review will focus in particular on the commitment on universal coverage, and is also informed by developments at EU level in relation to pensions.
The OECD will report on the sustainability of the pension system in the light of demographic and investment challenges; the adequacy and coverage levels, in order to ensure adequate income in retirement with a particular focus on the lower and middle income group; the modernity of pension systems to ensure flexibility in the labour market and supporting mechanisms for longer working, and equity within the pension system.
In addition to this overall review, the Government has, since coming into office, introduced a number of key pension reforms. Legislation was introduced in the Social Welfare and Pensions Act, 2011 to abolish the State pension (transition) with effect from January 2014 thereby standardising pension age at 66. The State pension (contributory) age will be increased to 67 in 2021 and to 68 with effect from 2028. Further changes to State pension include changes to rate bands; to align the rate of pension paid with the contribution made ensures that those who contribute more during a working life benefit more in retirement than those with lesser contributions.
Significant changes to occupational pensions, specifically defined benefit pension provision have also been introduced. Legislation introduced in 2011 provided for a sovereign annuity as an option for pension schemes. In August, the National Treasury Management Agency (NTMA) announced details of the sale of over €1 billion of Irish Amortising Bonds which were purchased by pension schemes and welcomed pension funds into the economy. The regulatory structure for defined benefit pension schemes has been re-introduced. Legislation enacted during the year strengthened the Funding Standard by introducing a requirement for schemes to develop a risk reserve from 2016 and to meet the reserve requirement in 2023 with a view to ensuring greater security for pension scheme members and giving pension schemes increased protection from market volatility in the future.
The “Report on Pension Charges in Ireland 2012” was recently published by my Department with support from the Central Bank and Pensions Board. This report, which is a fact finding report, has concluded that there are serious challenges in relation to the reasonableness and transparency of the pension changes. Comments from interested parties and stakeholders are being invited over a 3 month period (i.e. by the end of January 2013). These responses will be considered and a further policy and regulatory response, if necessary, will be brought to Government.