‘Automatic’ sign up to pension fund on cards
Social Welfare Minister Leo Varadkar has said he is considering an automatic pension fund contributory charge for workers, styled on similar ones in Britain or Australia.
The move is to counter the situation where only one in three private sector workers are contributing to a personal pension fund amid fears of a pensions’ timebomb.
The minister also said he favoured an SSIA-styled private pension saving scheme, where the State also made contributions, where contributors could also dip into later in life for other reasons beyond retirement. This included if they needed access to funds for doing up a home.
Asked about the possibility of a compulsory pensions scheme for people, the Fine Gael minister said there was already payments going into state pensions and that PRSI was compulsory.
However, it is estimated only a third of workers in the private sector are paying into their pension pot, which is separate from the state pension. Mr Varadkar said this was higher as people got older and they were reluctant to pay in their 20s or 30s.
“What I would like to do is establish a personal future fund, that is similar to what happens in other countries, where it is not compulsory but people are enrolled automatically paying into their own saving fund.
“In some countries it is compulsory, in others you can opt out or opt in. What they have done in Britain, which I think is quite good, is auto enrolment with opt out. So you are auto-enrolled into a state pension scheme. This is in addition to your state pension.”
He said now that the “the economic crisis is over we can actually start to do these things.”
The newly appointed minister pointed out a system in Australia, which recently experienced a boom, where amounts for personal pension funds are deducted from pay rises.
“What they did in Australia is they agreed to forego part of the pay increase every other year in return for some of their money being put into their personal pension fund.”
Similar pay rises are now expected in Ireland for workers following the recession, especially as the economy recovers.
Elsewhere, the minister said a process of extending social benefits to self- employed workers would begin over the summer. A public consultation will begin to try to bring in changes and some protections for the self-employed by the end of the year.
Many self-employed people get no protections or welfare payments if they become sick or get injured or have to leave work.
“Obviously, linked to increased benefits would be increased contributions. I would have to consult widely on that first,” said the minister.
