Ireland should make its pension system simpler and fairer so that everyone gets sufficient income for a decent standard of living in retirement, according to international advisers.
A report on the retirement time-bomb by the OECD think-tank found that the Government should put in place either a universal or a means-tested pension scheme, both topped up with a compulsory private pension.
And the advisers said that the retirement age of 68 should be revised to reflect growing life expectancy after 2028.
John Martin, OECD director of employment, labour and social affairs, said the cost of pensions has to be reduced.
“Ireland needs to make its pension system more affordable in the long-term. With public finances under pressure and to avoid a rise in pensioner poverty, private pension coverage needs to be increased urgently,” he said.
The basic Irish state pension is considered relatively generous at 35% of average earnings, second only to New Zealand, which explains Ireland’s low pensioner poverty rate of 10% where the OECD average is 15%. The two countries are the only OECD nations with no mandatory retirement savings plan.
Among the advice to Government was:
- More people could be encouraged to stay in work if state pensions are cut or raised depending on how long you work for.
- In the state benefit pension all contributions made should be honoured in the calculation of the pension benefit.
- The current system of offering bigger savers bigger tax reliefs only benefits the most well-off.
- A universal system would be funded by taxes and contributions at a flat-rate regardless of how long you work.
- Heating, electricity, phone and travel benefits could be changed to a cash sum paid on a means-test basis along with the pension.
- Means testing should be considered with thresholds set for higher earners.
- Mandatory pensions saving is less expensive and more successful than automatic enrolment.
- Flat subsidies and matching contributions increase incentives to save for retirement for middle to low incomes.
Social Protection Minister Joan Burton says the Cabinet will consider the proposals over the coming months.
"The essential and key thing here is to look at the costings, what they deliver to people, and the operatibility of those schemes," she said.
"But also the critical question is how attractive are schemes going to be for that group of low- and middle-income earners, including women."