IRELAND - There is an urgent need to overhaul the Irish pensions system, according to a number of pre-budgetary submissions published this week.
Calls to waive Special Savings Incentive Accounts (SSIA) holders’ exit tax, improve incentives for lower and middle-income workers to join pension schemes, and the need for government to exercise caution on mandatory pensions were among the key issues brought forward so far.
The Irish Congress of Trade Unions (ICTU) said in its submission there was a pressing need to greatly improve incentives for lower and middle-income workers to join pension schemes.
“This is a major issue on which Congress believes serious action must be taken. Congress looks forward to the forthcoming report from the National Pensions Board, which should inform further debate on the subject,” the submission read.
The ICTU said there was also a strong case to waive the 23% 'exit tax' for SSIA holders, provided they direct the use of the SSIA monies to set up pension schemes or to increase contributions to existing schemes.
Mercer consulting actuary Joyce Brennan (pictured) agreed that Government could learn from the popularity of SSIAs and apply the same simplicity to pensions. “If the Government wants to increase pension coverage to 70% of the population, it must come up with a system which will appeal to all income levels,” she said. In its submission, Mercer called for an urgent overhaul of the pensions system, highlighting a number of areas to be addressed.
In relation to the introduction of mandatory pension schemes Mercer urged the Minister for Social Welfare to act with caution. The current State pension is funded by employee and employer PRSI and a second system on top of this just adds another layer of administration, said Brennan.
“A mandatory system would be poorly perceived by employers and employees as an additional tax. In our opinion the Minister should consider focusing on encouragement, education and simplifying the current system. The international experience shows that the introduction of mandatory pensions has failed to increase the level of pension coverage in markets where it has been introduced.”
Mercer also called for incentivisation of defined benefit pension schemes.
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