Fianna Fáil pensions promise gives Fine Gael electoral ammunition

WHEN things go wrong they go very wrong.

Take the Fianna Fáil pensions policy announced this week. From months out it was clear the senior Government partner would follow the strategy it had followed in 2002 and tell the electorate they had never had it so good.

In the pensions area, it could hardly have been criticised. It promised to raise the basic State pension to €200 within the five-year term of Government. It achieved that aim in last December’s budget.

However, on the wider pensions issue, Social Affairs Minister Seamus Brennan had more mixed results. For years, he has been telling us, as did former Finance Minister Charlie McCreevy, that Ireland was sitting on a pensions time bomb. Already 1% of our income goes into a special national pension reserve fund.

The country’s population is aging and the ratio of workers to retired people will fall to a little over 2:1 by the middle of this century. That will put huge strains on the Exchequer. What adds to the concern is that an estimated 900,000 people in the workforce — most of them female — have not made any private pension provisions. With people living longer, there are real fears the State pension will be inadequate.

Mr Brennan promised a Green Paper to grapple with all of these issues but despite promises it would appear this spring, it has failed to materialise.

He has expressed enthusiasm for some form of compulsory or mandatory pension scheme to essentially cajole people into taking on the responsibility. But the idea hasn’t met with approval with some of his colleagues, who are uneasy about the notion of compulsion.

At the Fianna Fáil Árd Fheis earlier this spring, the Taoiseach announced he wanted to raise the State pension to €300 by 2012. So far so uncontroversial, as many other parties have also pledged themselves to that target.

But the Government ran into difficulty this week when Mr Brennan announced an SSIA-type scheme for pensions, to be introduced soon if a FF-led government was elected. The idea seems attractive. Like the SSIA, the Government adds to the funds saved.

The current scheme, the PRSA, is based on tax relief. However, the take-up has been lower than anticipated and of course it favours the better-off, who can afford to put more money in and also enjoy 41% relief as opposed to 20% relief for lower earners.

But a scheme like that, if it became popular, would have a huge price tag. Tax relief for pensions costs €2 billion a year already (and it disproportionately benefits the very rich). A successful scheme could be as costly as the SSIA scheme, which had a €3bn tag.

Fianna Fáil’s big problem is that it could provide no costings for this, and it had made no provision for it in its own budgetary projections for the next five years.

Fine Gael’s Richard Bruton couldn’t believe his luck.

After FF had battered the figures of his party’s economic policies earlier this week, he was able to produce Department of Finance estimates that showed this could cost €500 million a year, thus putting the Government finances into a deficit situation by 2012.

Suddenly Fianna Fáil found itself on the back foot. And despite subsequent clarifications, it couldn’t quite dispel the impression that this was an unfinished symphony.