REACTION:THE NATIONAL Pension Framework has been criticised by trade union, business, social and political groups as a flawed initiative that would pose problems for many businesses.
Small and medium enterprise group Isme said the introduction of mandatory employer contributions was ill-conceived and would simply act as another direct tax on employment.
Under the Government plan, a new mandatory “auto-enrolment” pension for middle and lower-income workers in the private sector is to be established.
Most workers aged over 22 will be automatically enrolled in a scheme which will provide additional retirement income on top of the State pension, unless they are already members of an occupational scheme.
Employees will contribute 4 per cent of salary to the new scheme with employers and the State each paying a further 2 per cent. The proposals will also see a phased increase in retirement age from 65 to 68 between now and 2028, starting with an increase to 66 in 2014.
“The majority of SMEs will not be able to afford to make a contribution to employees’ pension schemes due to the significant costs already being experienced by the sector,” Isme chief executive Mark Fielding said. He said the mandatory proposal contained in the framework, when implemented, would be used as a negotiating ploy to increase the level of employer contributions into the future.
“It won’t be long before the 2 per cent contribution from employers will be negotiated upwards, as has happened in Australia.”
Employers group Ibec said the Government proposal would fuel wage demands, particularly in labour-intensive industries and for small employers who were already struggling to survive.
Ibec said it made sense to gradually increase the State retirement age to help ease the burden of providing pensions, but that it would be more supportive of a phased increase through voluntary agreement between employers and employees. “Employers are struggling financially to provide defined benefit pensions,” Ibec’s director Brendan McGinty said.
“Market losses in 2008 were particularly savage and, together with having to provide for longer retirements, this has meant that the majority of defined benefit schemes are currently insolvent.”
Irish Congress of Trade Unions general secretary David Begg said the proposal was “questionable” as it would force people to invest more money into private pension funds when their investment record was quite poor.
“One would have to question the idea of creating these new funds in the private sector, because in 2008, all of the existing occupational pension funds lost about half of their value,” Mr Begg said on RTÉ’s Morning Ireland. “It’s very questionable that we could come along to some people who lost that amount of money and say ‘here, take more’.”
Ictu had hoped to see some move to expand the National Pension Reserve Fund, which, he said, had done “quite well” in contrast to its private counterparts.
The framework document says 47,000 people in the State do not receive a pension because of legacy issues dating back to the 1980s such as gaps in social insurance coverage. These mainly former public servants, self-employed people and their spouses or partners are affected and as a result do not receive any income support through the State pension system.
Social Justice Ireland (SJI) said the new proposal was flawed as it would mean that these 47,000 people and many more would still have no entitlement to a pension.
“This situation is totally unacceptable,” SJI director Fr Seán Healy said. It “could have been addressed effectively by introducing a universal pension entitlement”.
Fr Healy urged the Government to ensure that pension funds were not being handed over to be managed to the discredited private pensions industry.
Labour TD Róisín Shortall called for the proposal to be abandoned as it effectively gave just four years notice to people in their early 60s of very significant changes to their entitlements.
