An Taoiseach, Bertie Ahern, TD, the Tanaiste and Minister for Finance, Brian Cowen, TD and the Minister for Social and Family Affairs, Martin Cullen, TD today launched the Green Paper on Pensions.
The Green Paper covers the background to the Irish pension system and a broad range of issues related to social welfare, occupational, personal, and public service arrangements. The demographic and sustainability challenges facing Ireland in the decades ahead are outlined and a number of scenarios and options are discussed.
These include measures to address the sustainability challenge, maintaining the status quo, universal provision, increasing social welfare pensions, SSIA-type tax incentives and soft mandatory and mandatory approaches. Other elements covered include annuities, the role of regulation and issues related to work flexibility in older age.
Speaking at the launch of the document the Taoiseach said: "Now that we are living fuller, longer and more productive lives, we need to shift our thinking. Let us look at how we can create advantage from demographic trends to enhance the quality of life of individuals. The pensions issue is a challenge which will be facing us for decades to come and will require a fair and flexible approach."
The Tanaiste said: "The Green Paper makes it very clear that we face a difficult challenge in ensuring the financial and economic sustainability of our pension system as the task of financing increased spending on pensions falls to a diminishing share of the population . He added that: "Difficult options must be discussed if we are to have an open and honest debate on our future pension strategy. It is very important that the scale of this challenge is understood before policy decisions are made in this area.
Minister Martin Cullen said: "Pensions is one of the major issues the country must tackle for the future and any decisions we take at this stage will impact on society for decades to come. There are no easy answers. People are living longer in retirement. However as a country we are fortunate that we have time before this change impacts." Cullen added: "It is a challenge that I and the Government are determined to meet so that current and future generations will have in place a pensions system that will deliver a secure and fulfilling retirement for all."
A public consultation process is planned following today s publication of the Green Paper. Cullen commented: "The essential purpose of this Paper is to promote debate and build consensus. Given the importance of the issue, I am anxious to ensure that the consultation process is as inclusive as possible and that people have ample time to study the Green Paper and to formulate their ideas. We need to consider the type of retirement we want and how we might pay for it. I am pleased that we are about to embark on that debate. I have an open mind on how the pensions system should develop in the future and I look forward to hearing the views of all interested parties on how we should proceed."
In addition to the Green Paper, the Government also launched the Actuarial Review of the Social Insurance Fund 2005 and the Review of the Irish Annuities Market. Both of these documents provided important information and context that informed the development of the Green Paper.
SSIA style pension product is critical to tackling pensions problem
Irish Life - the largest provider of pensions in the country - has said that pensions reform must include an SSIA style pensions incentive if it is to have any effect on encouraging more people to save for their retirement. The comments were made in response to the publication of the Green Paper.
Brendan McEvoy, head of marketing with Irish Life, said that the success of the SSIA scheme was a perfect illustration of the potential of such a model for the pensions industry; we've researched this issue carefully and if we were to replicate the SSIA model for pensions, I believe we would see a dramatic increase in the number of people saving for retirement."
McEvoy said key features of any new SSIA type scheme would be the introduction of a system of matching payment to support payments being made privately by pension savers; "Despite millions of euro in promotions and advertising, consumers simply don't like or understand the tax relief model we have at present. They want a simpler system whereby the Government makes payments to match those made by participants and the evidence proves that they'll respond enthusiastically to such a move.'"
McEvoy welcomed the publication of the Green Paper; "The Government paper spells out clearly some of the key choices policymakers are going to have to make in the years ahead. It's a welcome contribution to the debate on pensions policy but we can't afford to waste too much time. We should move quickly from discussion to implementation."
McEvoy also said that a priority in pensions reform must be an increase in State Pensions because for those who can't afford to make private provision, such pensions may be their only income in retirement.
In respect of making pensions compulsory, McEvoy said that there was no compelling evidence that making pensions compulsory had worked anywhere; "if anything compulsion makes people regard pensions provision as the responsibility of the State and we'll end up with a greater crisis in the years ahead if we go down that route."
