Dáil Éireann Debate, Wednesday - 28 April 2004
137 Mr. M. Higgins asked the Minister for Social and Family Affairs her views on the recent ESRI report, “Reforming Pensions in Europe: Evolution of Pension Financing and Sources of Retirement Income”; and if she will make a statement on the matter. [12044/04]
Amharc ar fhreagraThe publication in question, which I had the pleasure to launch recently, is based on a series of papers presented at a conference organised by the European Network for Research on Supplementary Pensions and L'Institut de Recherches Economiques et Sociales held in Paris in October 2002.
Over the coming decades the EU faces a significant acceleration of demographic ageing due to three main factors: the baby boom generation reaching pension age; increases in life expectancy; and a declining birth rate. The number of people of pension age will increase rapidly and at the same time the number in the active age groups will diminish. Unless the situation is carefully managed, the changes in the old age dependency ratio will, in the future, place a heavy financial burden on those in employment to support those who are retired.
In these circumstances, it is not surprising that countries are looking at their pension systems and are implementing reforms which, in many cases, introduce a funded element into schemes which, heretofore, have provided generous earnings related benefits on a pay as one goes basis. These reforms are attempting to strike a difficult balance between the financial sustainability of pensions systems and their social objectives. In a sense it is difficult to separate these two aspects of pension provision as financial sustainability is a necessary precondition for a system of adequate pensions provision.
The papers presented raise concerns about the reforms being undertaken as the authors consider that, in many cases, they will actually increase costs because of the tax incentives being introduced to encourage private pension provision. They also consider that pension entitlements will be less secure and the percentage of pre-retirement income replaced by the pension system will actually fall as a result of the reforms. The Irish pension system is radically different from those which apply in many other EU countries and our demographic situation is much more favourable. Although, in time, we will face similar increases in dependency ratios already being experienced in other countries, the same pressures for reform do not exist here.
However, preparations in the form of the National Pensions Reserve Fund are already in place to meet the challenge of increased costs arising from changes in our demographic situation. We are also working to improve the position of our older people by increasing the level of our social welfare pensions and also by encouraging people to supplement this by participating in occupational and private pensions. The papers presented clearly demonstrate the complexity of the issues involved in pensions reform and the dilemmas faced by policy makers in trying to balance competing objectives of adequacy and sustainability and the need to make all costs transparent.
