The Irish Pensions Board has recommended the Government pay an extra £23 a week to old-age pensioners. This would be an increase from the current 27 per cent of average national income to 34.5 per cent.
This is one of a number of proposals in the board's report. which is due to be published by the Minister for Social, Community and Family Affairs, Mr Ahern, next Thursday.
The Irish Times has learned it also recommends greater access to private pension schemes for the low paid. It says bodies such as trade unions, credit unions and supermarkets should be access-providers of schemes for the growing numbers of atypical workers excluded from company pension schemes.
The board says atypical workers in temporary or casual employment, and people on short-term contracts, should have access to low-cost Personal Retirement Savings Accounts (PRSA). These would enable them to contribute to pension funds on a tax-efficient basis. Although it stops short of recommending employers be made liable for contributing to PRSAs, the report says it should be mandatory for them to provide access to at least one PRSA scheme for workers.
These, and other recommendations in the IPB report, provide for a new approach to funding pensions in the next century. The report says existing schemes will be unable to fund adequate incomes for a rapidly ageing population after 2025.
The report was prepared for the IPB by the National Pensions Policy Initiative (NPPI), which was established by the former Minister, Mr Proinsias De Rossa.
The ICTU and the Irish Business and Employers' Confederation participated. Its findings are expected to be referred by the Government to the social partners through the central review committee of Partnership 2000 for approval.
The figure of 34.5 per cent of the national average income was agreed by the NPPI on the basis this was the level of income identified by the Commission on Social Welfare as necessary to provide the elderly with minimally acceptable living standards.
While the NPPI looked at the possibility of making PRSAs mandatory, it opted for higher State pensions. But it could not agree on how the extra financial burden to the State should be addressed.
Basically it would require an increase in PRSI contributions from employers, workers and the self-employed, along with a larger Exchequer contribution. The precise balancing of contributions has been left to the Government and social partners.
About 45 per cent of workers are in company pension schemes, many of which are defined-benefit schemes and have a built-in provision to provide a certain level of income, minus the State pension. For these companies, the cost of higher PRSI rates to fund better State pensions could be offset by savings on the company's own pension bill.
The IPB is advising the Government to establish a fund to meet its own long-term commitments to old-age pensioners urgently. Windfall benefits, such as those from privatisations, could go into the fund, as well as regular contributions.
The establishment of low-cost PRSAs for workers in low-paid atypical employment is a priority of the report. It says such schemes should be flexible and tied to the individual rather than the workplace.
While employers would be obliged to provide access to PRSAs, workers could opt for another provider. The report says the IPB should provide a standard mark of approval and the charges of such providers would have to be transparent. Existing regulatory controls for the insurance industry should cover the new providers as well.