Secure and adequate finances are one of the fundamental components of a happy and active retirement. The sustainability of the pension system is a particular concern because of the demographic challenges Ireland faces, the associated increases in pension (and other age related) costs, and the deterioration in the public finances. This means that, in the future, 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 older people will decrease from 5.3 to 1 at present to 2.1 to 1 by 2060. Life expectancy in Ireland is also increasing and whilst this is very welcome development, it also presents very real and obvious public policy challenges.
Discussions on long term pension policy identified the need for a short and focussed examination on the direction of policy to ensure a modern, sustainable, and adequate pension system taking into account the impact of the economic downturn. It was in this regard that the OECD was commissioned to review long term pension policy in Ireland.
The particular aspects being considered by the OECD include:
- 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;
- equity within the pension system.
The review was initiated in April 2012. Since then, the OECD has engaged extensively with a range of Government departments, the social partners, older groups and representatives from the pensions industry. A consultation forum including a wide range of stakeholders was held in Farmleigh House in September 2012.
It is anticipated that the final OECD report, which will be used to inform government decisions in this area, will be presented to me in the coming weeks. Following consideration, I will then bring the report to Government before publishing it.