Pensioners to benefit but workforce ignored

Minister Cowen has done little to encourage workers to pay into pensions, writes David Clerkin.

BRIAN COWEN took care of pensioners yesterday but did little to encourage those still in the workforce to make their own plans for their post-retirement income.

The State pension went up €12 per week, or 7%, to €179.30, while the Old Age Non-Contributory Pension, which is means-tested, will rise to €166 per week next year. Mr Cowen said the increases left the Government “well on the way” to reaching its commitment of giving pensioners €200 per week by 2007.

Pensioners would be over €80 per week better off next year than when the Fianna Fáil/Progressive Democrat coalition first came to office in 1997, said Mr Cowen, who added that the State pension had increased by 80% over the past seven years.

Accounting firm Deloitte said improvements in the State pension had comfortably outpaced increases in the cost of living under the current government and that pensioners now had e50 more in their pockets each week, allowing for inflation.

But Age Action Ireland said it was “disappointed” with the size of the increase and that Mr Cowen should have dug deeper. The group wanted a 10% hike in the State pension and a 12.5% increase in the non-contributory pension.

Changes in the tax bands found favour, however, as it welcomed news that nearly 5,000 older people would be taken out of the tax net. But it said the improvements should be seen in the context of increasing poverty among older people. Some 24% of the over-65 age group lived below the poverty line in 1997, but this number had risen to 43%, according to the group.

The Irish Congress of Trade Unions (ICTU) said more could have been done in the pensions area and that the increases were lower than expected.

Mr Cowen also decided against announcing any fresh initiatives to boost the take-up of private pensions or to perform surgery on the looming public sector pensions problem. Unlike his predecessor, who took the first steps in easing the pension pressure on the public purse last year by raising the retirement age for new entrants to state jobs, Mr Cowen made no reference to the issue in his speech.

The Chambers of Commerce of Ireland (CCI) said Mr Cowen had ignored recommendations to increase employee contributions to public pensions by 1%. CCI said it was disappointing not to see the advice of the Pensions Commission being implemented. “The Government must acknowledge that the difference in the value of public sector and private sector pensions is around €800,000 at retirement,” said CCI chief executive John Dunne.

Trade union SIPTU’s Women’s Committee said the Government had failed to act on pensions and that it was “appalled” at the lack of progress on the issue. “Despite the obvious pensions crisis, which clearly calls for radical action to protect existing pension schemes and encourage the establishment of new ones, the government has failed to respond to any of the imaginative proposals put forward by SIPTU, ICTU and other organisations,” said Rosheen Callender, the union’s national equality secretary.

There were no moves to provide better incentives for employees to take out personal pension plans in spite of relatively slow progress in the take-up so far of Personal Retirement Savings Accounts (PRSAs). PRSAs were introduced to encourage workers to put money into private pensions. There had been speculation that Mr Cowen would consider additional tax relief to boost PRSA take-up.