Independant.ie

Ireland

September 28 2007

Victor Meldrew would agree with academics Gerard Hughes and Jim Stewart from Trinity College that Ireland's pension system is in need of a major overhaul

The Irish pension system is a failure and a greater reliance on private pensions, as advocated by the Pensions Board, will not solve the problems, a new book claims.

Ireland has one of the highest rates of pensioner poverty, while at the same time tax incentives disproportionately benefit higher earners.

There needs to be a radical overhaul of the tax incentives for pensions and a massive expansion of State provided pensions, the authors of "Choosing Your Future: How to Reform Ireland's Pension System" argue.

Published by TASC, a think tank which works for equality and social justice, the book takes issue with solutions advocated by the Pensions Board.

The Pensions Board response to low pensions coverage has been to encourage people to take out private pensions.

But the authors argue that vulnerable people cannot afford to invest in private pensions no matter what the incentive. Private pensions are risky, costly and complex which makes them unsuitable to middle and low earners, the book, edited by Trinity College academics Gerard Hughes and Jim Stewart, states.
Professor Hughes said yesterday: "Private pension providers can't supply individual pensions at reasonable costs to those with low or intermittent incomes."

Almost the same amount of money is being spent on State pensions as the Government forgoes on tax relief. In 2003, €2bn was spent paying State pensions, while tax relief was costed at €1.7bn.

The book says spending on State pensions in Ireland is just 2.5pc of GNP -- the lowest in the EU.

Ireland is also unusual in the EU in not having earnings-related pensions as part of the State schemes.

Poverty

Some 20pc of the pensioner population are in danger of poverty. This has improved markedly from 33pc in 2004, but still high by international terms, Professor Hughes said.

By 2012 the Government has committed to raise the weekly pension amount to €300. But by the time that is achieved, €300 will be below the minimum wage. And the authors of the book disagree with proposals to introduce mandatory pensions. This would amount to the State forcing people to take out a product which will give an uncertain return. Professor Hughes said some pension schemes lost 40pc of their value when the dot com bubble burst between 2000 and 2004.

Tax incentives should be the same for all tax payers, the authors urge. At present pension tax reliefs act as a tax shelter. Around two-thirds of the relief goes to the 20pc of top earners.

"There is no justification for the way the tax system transfers large amounts of money to higher earners," Professor Hughes said.

He took issue with the Pensions Board argument that the best way to increase pensions coverage was to provide additional tax incentives.

 

Copyright © Global Action on Aging
Terms of Use  |  Privacy Policy  |  Contact Us