ISME, which represents small business, warns that mandatory pensions would make a bad situation worse.
In a new report it condemns the Pensions Board’s policy as “flawed, self-serving and unworkable.”
The report commissioned by ISME into the pensions industry focuses on the role of the Pensions Board.
It concludes that despite its ongoing role since 1998, Ireland is still sitting on a “pensions time-bomb.”
It notes that liabilities to the public sector down the line will be much greater than is being provided for in the National Pensions Reserve Fund.
The report is a submission to the National Pensions Review Initiative and was written in association with Financial Engineering Network.
It argues that the Pensions Board has failed to take into account the huge rise in asset values when setting out to tackle the pensions question, said ISME.
Property has quadrupled in value over the past 10 years, while other investments have also grown, giving individuals a whopping €500 billion in non-pension assets to secure them in their old age.
“This figure is far in excess of the total pensions assets, highlighting that there are many varied and more effective ways of saving for retirement,” said Aidan McLoughlin, of Financial Engineering Network, one of the report’s authors.
In its examination of the PRSA product offering the cost was also quite high.
In the case of €1,000 invested every year over 30 years the amount paid in charges was over 60% of the basic amount invested.
Mr McLoughlin said the one size fits all approach to PRSAs meant there were no economies of scale and those who invested more paid more in charges.
ISME chief executive Mark Fielding said on the basis of the response to the new pension plan the product should be “immediately scrapped and that Special Savings Incentive Accounts and their structure should be utilised in the promotion of pension/savings, as an alternative.”
“What is required is a national initiative to encourage a savings culture among the employed, incorporating an element of retirement provision,” he said.
The continuing distrust of financial institutions has been identified as a factor in discouraging people from pension schemes. Only one in two pension savers trusted their pension provider. Almost 60% also said they were concerned with the charges being levied in relation to their scheme.