State must spend billions to defuse pension timebomb
Current projections, published in a report sent to the EU, show pension spending as a percentage of GNP will rise from 4.6% in 2000 to 9% in 2050.
“However,” the report states, “revised population projections by the Central Statistics Office, and initial work done in the context of the National Pensions Review, suggest that this figure is significantly understated.”
Exactly by how much won’t become clear until the review, being prepared by the Pensions Board, is finalised. “Those figures are being done at the moment,” said the chief executive of the board, Anne Maher, yesterday. The board should present the review to Social Welfare Minister Seamus Brennan in early October.
But - as a percentage of GNP, this year expected to reach €135.1 billion - it is clear the projections will see the State forking out billions more than expected on social welfare and public sector workers’ pensions in the coming decades.
The pensions timebomb facing Ireland has been well documented. Of two million workers, some 900,000 don’t have a pension. Just 51,000 people, less than 3% of workers, have opened Personal Retirement Savings Accounts (PRSAs) - products not tied to any one employer - since their introduction in 2003.
Many people face working beyond 65, or relying on the basic State pension for retirement income.
According to previous research by the board, almost nine in 10 of those without a pension believe State provision would not be enough to survive on. The weekly payment is €179.30.
Speaking yesterday, Mr Brennan said the report, the second prepared for the EU, set out “our current position on the policies and targets” of the pensions system. But future reform would only be considered after publication of the Pensions Board review.
He asked the board to assess the merits of giving people ‘options’ to work beyond 65, a mandatory scheme for employers to provide pensions, and a product that encourages SSIA holders to transfer some of this into pensions.
“We are failing to mobilise the public at large, and employees, to start contributing to pensions in the numbers required,” he said.
