Dáil Éireann Debate, Tuesday - 1 May 2012
310 Deputy Dara Calleary asked the Minister for Social Protection if any provisions exist or if she has plans to introduce provisions, whereby the holder of a private pension policy, the value of which is under a certain figure, may reclaim the full value of the policy if they cancel the policy early. [21436/12]
Amharc ar fhreagraPensions are a long-term investment aimed at ensuring that people have an adequate income in retirement. Government policy supports this aspiration through generous tax reliefs and we are currently reforming the pension system to ensure its future sustainability. At the moment, people are generally only permitted to access their pension savings at the retirement age defined in their pension schemes. Schemes may also have early retirement provisions from age 50 and when retirement is caused by ill-health, benefits may be paid regardless of age. In the case of Personal Retirement Savings Accounts (PRSAs) and Retirement Annuity Contracts (RACs), benefits may be taken at any time after age 60 and from any age in the case of ill-health.
There are a number of reasons why early withdrawals of pension savings are generally not permitted, nor desirable, the principal one being that funds, and the associated tax relief on contributions, are designed to support people in later life to ensure they have an adequate income. This requires that pensions must be long term vehicles based on the principle that savings will be "locked away" until retirement.
Allowing access to pension savings before retirement or pension age would be a significant change to pension policy and the basis of pension savings in Ireland. At the request of the Economic Management Council (EMC) the issue has been considered in detail by an inter-departmental ad-hoc group, chaired by the Department of Social Protection. The group concluded that the principle of pension savings being "locked away" until pension age should be maintained and reported this to the EMC. The Interdepartmental Group on Mortgage Arrears also examined the issue of early access to pensions and did not recommend such an approach.
The idea of allowing people to access their pension savings early to pay off mortgage debt or to increase their spending power may seem attractive, particularly at the moment. However, the resulting reduction in pension savings could have significant negative consequences longer term and in particular, fails to address the group who may be most affected by personal debt or mortgage arrears.
Younger people are unlikely to have significant pension savings and where their pension scheme has incurred losses, as many have over the past number of years, early withdrawal of funds would mean very poor value for money. There is no guarantee the funds could be repaid or that people could make up these losses. Where people are close to retirement, an early withdrawal of funds could significantly diminish the pension they receive as they may not have time before retirement age to fill the gap left by such a withdrawal.
Only 51% of people in employment aged 20 to 69 have pension coverage. This relatively low rate of pension coverage is a concern. The Programme for Government includes a commitment to reforming the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers and so a National Employment Pensions Scheme based on an automatic enrolment approach is being developed. Allowing people access to their pension savings before pension age would run totally counter to the policy of encouraging more people to save more for their retirement.
The Deputy will be aware that the Government has recently engaged the OECD to conduct an independent review of long term pension policy in Ireland. The review will encompass the totality of pension provision in Ireland — State, private, occupational and public sector. The issue of early access to pension savings will be considered in this context.
