Pension scheme needs to attract young people
It is clear the Government’s 70% coverage target is way off course; at present, it is just over 52%. Thousands of people will face a significant reduction in living standards when they retire, if they depend solely on State pension.
The proposal to make private pensions mandatory would be a retrograde step. Such a drastic measure would be strongly opposed by certain groups and individuals for a variety of reasons.
Some may already have alternative means by which to provide for retirement. Others would consider it another form of taxation, and others still would take offence at being compelled to do anything by Government.
However, something clearly needs to be done to ensure people make some provision for their retirement. Apart from those who are offered private pensions by their employers, the rest of us have to make a conscious decision to join one.
While many acknowledge the value of putting aside some money for retirement, most of us are lethargic on these issues. Especially for those in their 20s and, indeed, 30s, a pension is not an immediate priority and the decision invariably gets postponed until much later in life, when building up a reasonable retirement income becomes harder.
I would encourage Mr Brennan to consider a national pension scheme, with an opt-out clause. With this, Government would ensure all employees are automatically offered a private pension, perhaps when they start their first job or when they reach 25.
However, the difference with this option compared to the mandatory approach is that the individual can decide to opt out, within a reasonable period of being offered the pension. The benefit of this is that the pension question is presented to young people and this would compel them to consider the issue and make a choice. If properly presented and explained, I believe the majority would see the benefits of starting a private pension and accept the offer. The Government could make this option even more attractive by offering an incentive in the form of either a lump sum to start the pension, or increased tax relief to those who accept the offer.
ICTU recently reported that the top 10% of earners earn 40% of the benefits of pension tax relief. Therefore, the cost of such incentives could be funded by capping the amount high earners claim in relief, thereby shifting resources away from those who least need assistance to fund a pension to those who need it most.
James Doorley
Deanhill
Hayes
Navan
Co Meath
