Pensions time bomb: 900,000 face work until 70

HUNDREDS of thousands of people will have to work until they are 70 or older to fund their retirements because they are leaving it too late to take out pensions.

Figures released by Social Affairs Minister Seamus Brennan yesterday show that of the national workforce of two million people, roughly 900,000 do not have a pension.

Crucially, uptake of the much-heralded Personal Retirement Savings Accounts (PRSAs) personalised products not tied to any one employer is actually slowing down. Just 51,000 people less than 3% of the workforce have opened PRSAs since their introduction in 2003.

Unless urgent action is taken to increase pension coverage, Mr Brennan warned, many of the 900,000 will have to rely on the basic State old-age pension as their retirement income.

The maximum old-age pension currently available is less than €186 a week. Research by the Pensions Board found almost nine-in-10 of those currently without a pension believe State provision would not be enough to survive on.

Mr Brennan has now asked the board to assess three different proposals in its national pension review and report to him before September.

They are:

Giving people "options" to work beyond 65.

A mandatory scheme obliging all employers to provide pensions for their staff. In addition to employer and employee contributions, the State would also pay in to the scheme.

An "attractively packaged product" that would encourage holders of Special Saving Incentive Accounts (SSIAs) to transfer some or all of their savings into pensions when the accounts mature.

Mr Brennan also hinted that tax reliefs for higher earners investing in pensions could be reduced in favour of breaks for low-paid workers although this would be an issue for the Minister for Finance to decide on.

Speaking in Government Buildings at the launch of National Pensions Action Week, he insisted the pensions issue did not yet constitute a crisis, but admitted a "radical" approach was now needed. On the issue of retirement age, he said the reality was that men and women were living longer.

"Working a few years more can make a real difference to income in retirement," he said. He urged the Pensions Board to devise "innovative ways of encouraging and allowing people to work longer if that is what they want and of rewarding this with a bonus system when they eventually retire".

But last night, Age Action, while welcoming the general thrust of the proposal, warned it was essential that there would be "no coercion" involved.

"Significant numbers of retired older people would like to return to work, provided there were flexible hours and their pensions were not unduly diluted by taxation," it said.

"It is essential, however, that there be no coercion, that older people have a real choice at what age they retire, within certain parameters."

Businesses, meanwhile, have signalled they will oppose any proposal that would compel them to put pension schemes in place.