THE LATEST OECD figures on Irish pension provision highlight the need for a radical reform of our pension system, according to Paula Clancy, director of the independent Irish think tank, TASC.

She said over-reliance on a market-driven system of pension provision incentivised by tax reliefs had left thousands of workers at risk of poverty in old age.

Rather than tinkering with a fundamentally flawed system, the Government should shift the focus of pension provision to a State-led rather than a market-led system, she said.

“Of the 30 OECD countries, Ireland is fourth from the bottom when it comes to public spending on pensions – and we are third from the bottom in terms of pensioner poverty, with over 30 per cent of those aged over 65 struggling on incomes below the OECD poverty threshold.

“At the same time, Irish pension funds – which provide a third of retirement income in Ireland, compared to an OECD average of 20 per cent – have been hit hardest by the financial crisis, with real losses of 37.5 per cent during 2008”, Ms Clancy said.

“Rather than continuing to throw money – in the form of tax reliefs – at a private pension system which is neither financially nor socially sustainable, TASC has proposed increasing and universalising the state social welfare pension, and introducing a social insurance earnings-related ‘second tier’ pension.

“We have shown how such changes to the social welfare pension could be funded by standard-rating pension-related tax reliefs, which cost nearly €3 billion in 2005, the most recent year for which figures are available.

“During recent months, the Government has introduced a series of measures (such as giving pension funds extra time to balance their books, and amending the Pension Act provisions governing defined benefit scheme wind-ups). These measures, while welcome, are simply designed to prop up a system which is fundamentally flawed.

“The pension framework document which was promised before last Christmas is overdue, and there are no indications that the Government is prepared to grasp the nettle of pension reform and move from a market-led system propped up by inequitable tax reliefs to a State-led system which can deliver a secure income in retirement for all,” Ms Clancy said.