Brokers' warning on tweaking pensions system

The tweaking of the pensions system will not increase the low level of pension coverage, experts said today.

Almost half of the state’s two million-strong workforce do not have a private or occupational pension to boost their incomes in retirement.

The Irish Brokers Association (IBA) said the proposals published in the National Pensions Review this week would do little to improve the situation.

“The report’s recommendation are little more than a tweaking of a pension system that has patently failed and they are certainly not going to result in a queue of consumers rushing to take out Personal Retirement Savings Accounts (PRSAs),” said its financial services director Pat O’Sullivan.

The National Pensions Review, which was compiled by the Pensions Board, was the most comprehensive analysis of the €62bn industry for several years.

Its authors recommended incentives for investing the proceeds of SSIA schemes into pensions, and that the state match the contributions from individuals who invest in PRSAs, the portable pension product launched in 2004.

They also recommended extending 42% tax relief, which is currently only available to high earners, to everybody who makes pension contributions.

Brokers are responsible for about 55% of individual pensions and 90% of group pension schemes written every year.

But Mr O’Sullivan said the PRSA scheme was proving to be a miserable failure with sales down 28% in the first nine months of 2005 compared to the same period in 2004.

“Indeed, only 11% of the 74,000-odd employer schemes have any contributors,” he said.

He added that the proposals to tinker with PRSAs would only add to consumer confusion.

Social and Family Affairs Minister Seamus Brennan has said that the number of citizens over 65 will treble to 1.5 million in 50 years and doing nothing is not an option.

There are currently four workers supporting every pensioner but this will fall to 2.7 in 2026 and 1.5 in 2056.

The Government currently provides about €2.7bn in tax breaks for pensions.