Thomas Pringle
Question:139. Deputy Thomas Pringle asked the Minister for Social Protection her plans to introduce mandatory pension coverage for workers; and if she will make a statement on the matter. [3693/14]
View answerTuesday, 28 January 2014
Questions (139)
Written answers
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 tax reliefs) to make supplementary pension provision so that they may have an adequate replacement income when they retire from work. The State pension has been successful in ensuring older people have an adequate income. Compared to the rest of the population, older people in Ireland have the lowest consistent poverty rate (at 1.9%) and are least likely to be at risk of poverty. However, many people retiring from work will have a significant income gap if they do not have supplementary pension provision.
It is a priority for the Government to increase supplementary pension coverage and the Programme for Government includes a commitment to reforming the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers. Recent figures indicate that only half of workers aged between 20 and 69 years have a supplementary pension and this relatively low coverage is of major concern. The sustainability of the pension system is a particular concern because of the demographic challenges faced by Ireland, the associated increases in pension (and other age related) costs, and the deterioration in the public finances. This means that the task of financing future 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
The OECD Review of the Irish Pension System was launched in April 2013. Whilst endorsing pension policy reforms undertaken to date, the report also makes a number of recommendations for future reform. The OECD’s key recommendation is to improve the adequacy of pensions by increasing coverage in the funded part of the pensions system through a universal mandatory or quasi-mandatory employment based pension system.
The OECD has indicated in its report that its first preference is a mandatory scheme, with its second preference being automatic enrolment, whereby people would be automatically enrolled but could opt out. I have previously stated that 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. It is recognised that introduction of any such initiative would be best supported by a more favourable economic environment than is currently the case.
Decisions in this area are actively being considered and I expect to make an announcement shortly on future developments in pension policy.