Employers groups oppose State pension plan

STARK divisions within Government over the Pensions Board report on future pension policy were heightened yesterday when the country’s two leading employer groups rejected its conclusions.

The report, published on Tuesday, recommended a hybrid solution of significant increases in State pensions combined with a mandatory savings scheme as a solution to the looming pensions crisis.

This crisis will be caused by an ageing population and the fact that only half of the working population have private pension schemes.

The hybrid solution is favoured by Social Affairs Minister Seamus Brennan but is opposed by Minister for Finance Brian Cowen on the grounds that it would be unworkable and too costly for the Exchequer.

Yesterday the two employers groups, IBEC and ISME, rowed in behind the Finance Minister, rejecting any mandatory or compulsory pensions saving scheme for workers.

IBEC’s director of policy, Danny McCoy, said that Ireland already had a high savings rate and said the voluntary approach was best.

“We should be building on that rather than moving prematurely into compulsory savings territory,” he said.

Jim Curran of ISME said that report’s recommendation would impose further costs on small companies and would impact on competitiveness. He echoed Mr McCoy’s call to encourage a voluntary savings culture.

Responding to the clear divisions that have emerged between his Department and Finance, Mr Brennan said yesterday that finding a solution would be difficult, as it would have to try to balance the need to give people proper pensions and the need of Government to ensure it did not become too much of a drain on the Exchequer.

“It is a big ticket issue. Whatever solution we come up with, it’s going to be costly,” he said.

It came as the Green Party yesterday unveiled its own ambitious policy paper on pensions.

The party advocates a strong State pension allied with an opt-out savings scheme, or so-called soft mandatory scheme.

A central element of the Green Party’s policy is tapered matching contributions by the State to those who invest in private pensions. For example, the State would donate €10,000 on top of the first €20,000 invested and lower amounts for each subsequent €20,000.

The party has set as its long-term goal that those over 65 should be entitled to two thirds of the average industrial wage — the current level is one third.