The Government has given the go-ahead for an expert group to begin work on a new retirement plan to address the “pensions time bomb”. Tánaiste Joan Burton brought a memorandum to Cabinet on Thursday with proposals for a universal retirement savings scheme for private-sector workers.
A group will be assembled, including senior civil servants from several Government departments as well as experts drawn from the financial industry. The group has been asked to devise a plan that will result in automatic enrolment in pension schemes for working people who are not employed by the State and do not have existing private pension schemes.
Inadequate pension provision
One in two private-sector workers is not in a pension scheme. With the percentage of older people in the population expected to increase until mid-century, there are concerns that the State pension will be inadequate to meet the needs of private-sector employees who are not in a scheme.
Governments have warned about this problem since early in the last decade and various solutions have been suggested, including mandatory pension schemes for all workers.
The new arrangement will not go quite so far. Private-sector workers will be automatically enrolled in such schemes, but these will not be fully compulsory. Those employees who wish to opt out will be able to do so.
A spokesman for the Tánaiste said on Thursday evening that the scheme would be very complex and would take at least a year to design. He added that Ms Burton was of the view that it could only be introduced when the economy had recovered sufficiently and people's incomes were stable enough to allow them invest in such long-term schemes.
Upon retirement, public-sector workers are entitled to a tax-free lump sum of one and a half times their salary, as well as a yearly pension of up to half of their salary.
Sinn Féin reaction
Reacting to the announcement, Sinn Féin spokesman on social protection Aengus Ó Snodaigh claimed the Government had sat on its hands since the Organisation for Economic Co-operation and Development’s review of the Irish pension system was published two years ago.
“Pension policy reform is something that necessitates planning over the very long term and I’m not one to advocate delaying action. However, the notion that this Government, who have long since lost their mandate, could produce something impacting the core of people’s income for generations to come is ridiculous,” he said.
The Cabinet also agreed yesterday to new legislation that will give borrowers the same consumer protections if their loans are sold from a regulated entity to a company or institution that is not regulated by the Central Bank in Ireland.
