Terence Flanagan
Question:429. Deputy Terence Flanagan asked the Minister for Social Protection the position regarding auto-enrolment (details supplied); and if she will make a statement on the matter. [57980/12]
View answerWednesday, 16 January 2013
Questions (429)
Written answers
In recent years there has been a particular focus on the sustainability of the pension system because of the demographic challenges Ireland faces, the associated increases in pension (and other age related) costs, and the deterioration in the public finances. In general terms, the task of financing increased pension spending will fall to a diminishing share of the population as demographic projections indicate the ratio of working age to pensioners will decrease from 5.3/1 at present to 2.1/1 by 2060. Life expectancy in Ireland is increasing – in the mid 1990s, life expectancy for males was 73 and for females 78.5. In 2041, it will be 86.5 and 88.3 respectively. Whilst increasing life expectancy is a very welcome development, it also presents very real and obvious public policy challenges.
Most recent figures indicate that approximately half of workers aged between 20 and 69 years have a private pension and this figure may have decreased as a result of the difficult economic environment. The fact that private pension coverage continues to be relatively low is of major concern to the Government.
The overall objective of the pension system in Ireland is to provide an adequate and sustainable basic standard of living through direct State supports and to encourage people (through generous tax reliefs) to make supplementary pension provision so that they may have an adequate income replacement rates when they retire from work.
The State already provides a funding mechanism to secure a basic income for all contributors through the PRSI system and the payment of the State pension. The State pension will continue to be the bedrock of our pension system and we have introduced a number of reforms in order to increase the sustainability of the system into the future so that we can continue to maintain the value of the State pension.
While the State pension is expected to provide sufficient retirement income for the lowest paid workers, many people retiring from work will have a significant income gap if they do not have supplementary private pension provision. Therefore, increasing supplementary pension coverage, particular amongst the lower paid and those with gaps in their employment, is a priority for the Government. The Programme for Government includes a commitment to reforming the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers. A soft-mandatory approach such as that envisaged by an auto-enrolment scheme, using scale to achieve greater cost efficiencies for the member, is a very proactive way in which we can increase supplementary pension coverage, though it is recognised that introduction of such an initiative would be best supported by a more favourable economic environment than is currently the case.
In relation to Ireland’s pensions system, recent discussions on pension policy identified the need for a short and focussed examination on the direction of long term policy to ensure a modern, sustainable, and adequate pension system taking into account the impact of the economic downturn. In this regard, the OECD was commissioned by the Department of Social Protection to review long term pension policy in Ireland and this will include consideration of an auto enrolment system. I am expecting the final report from the OECD in the first quarter of this year and I will be bringing this to Government for decision.