Madam, – Dan O’Brien (Opinion, July 15th) proposes that, in hard times, efficacy trumps equity and that State pensions to older people should be cut now that Ireland is enduring hard times. In fact, the State pension is an example of public policy combining both principles. Modest increases in the State pension over recent years have been efficient in reducing the very high poverty levels among older people. Nonetheless, their risk of poverty remains high. More than 80 per cent of older people rely on the State pension for protection against risk of poverty and that percentage increases with age.
Figures for pension bills need to be unpacked and Mr O’Brien has not done this with the estimate he presented. Expenditure on State pensions in 2008 was €4.3 billion and expenditure on tax relief to private pensions in the same year was €3 billion. Evaluated against equity and efficacy criteria, expenditure on the State pension achieves better outcomes, keeping a majority of our older citizens out of poverty while 80 per cent of tax relief savings goes to the top 20 per cent of income earners. Private pension schemes lost 38 per cent of their value in 2009, demonstrating their unreliability as a source of secure retirement income.
Far from enjoying gains in income as Mr O’Brien believes, the value of older people’s pensions is being eroded by increased charges and taxes, including costs of insurance, carbon tax, prescription charges and loss of dental and optical benefits.
Sustaining the State pension at current levels is good for older people and good for the local economy in which they spend their money. Contrast this with our “high net worth individuals”, a segment of the population that grew by 10 per cent last year and who, according to Merrill Lynch, favour investing their assets abroad.
At a time when the Government is developing proposals for long-term pension reform, citizens, of all ages, need to be able to trust that the contributions they make throughout their lives will allow them to live with security and dignity in later years.
The State pension is fundamental to that system and should not be cut in the upcoming budget. – Yours, etc,