State pensions 'should be strengthened'

Boosting State pensions is the only way to relieve the relative poverty of older people in Ireland within the next decade, a new report has warned.

A study commissioned by the Irish Association of Pension Funds (IAPF) claims introducing mandatory pensions - currently being considered as part of the Pensions Board's national pensions review - will take longer to produce significant benefits.

The report also identifies significant political difficulties with introducing further compulsion to the system on top of existing PRSI contributions.

"How can a single mandatory savings scheme operate to be fair to all without becoming confusingly complex? It must cater for those at the lowest income levels, struggling to make ends meet in the present, and to the very richest, who have ample savings already," according to the report's author, Dr Shane Whelan of UCD's school of mathematical sciences.

The report also predicted the number of people with adequately funded pensions will fall despite the Government's campaign to increase pensions coverage.

Dr Whelan found that occupational pensions are under threat as a result of the trend for employers to pass on investment and longevity risks to staff, a trend the report says is likely to put people off saving for retirement.

A State-backed annuity system would stimulate voluntary pensions saving as it would transfer much of the risk to the State and make the system more transparent, he said.

Defined benefit pension schemes, which are the best kind of schemes for employees, are being undermined by an overly severe regulatory regime, according to Dr Whelan, while defined contribution occupational schemes and personal pensions may not provide adequate retirement income.

The income divide between pensioners who have a private pension as well as the State pension and those who don't is likely to widen over the next couple of decades, the report notes.

IAPF chairman Joe Byrne said the Government could continue to afford to fund State pensions at current levels linked to earnings, unlike its European counterparts.

"The Whelan report strongly suggests that the Government has the capacity to defuse Ireland's pensions crisis, firstly by eliminating regulatory barriers to defined benefit schemes and secondly by incentivising contributions to defined contribution schemes," Mr Byrne said.