A new report on pensions says that the introduction of additional pensions compulsion on top of the mandatory PRSI based state pension scheme may be politically unworkable.
The report - commissioned by the Irish Association of Pensions Funds and conducted by Dr Shane Whelan at the School of Mathematical Sciences in UCD - states that the Government's pensions policy must change from a narrow focus on increasing coverage to protecting the adequacy and coverage of existing pension scheme.
The report was commissioned to further the debate on national pensions policy and to look at the issue of introducing compulsory savings for pensions.
The Whelan report questions the difficulties of introducing further compulsion as people have different savings priorities depending on their age and financial circumstances.
'How can the scheme achieve a balance of interests between the young person starting on a career with a low salary and high borrowings, the couple rearing children and repaying a mortgage, and the older couple with an empty nest and home purchased,' Dr Whelan asks.
The study finds that there has been a move in other countries to introduce compulsory defined contribution schemes to defuse the pensions crisis. But it says that it is too early to review such schemes as no significant benefits have been paid and the experience to date has been mixed.
The pensions time bomb here in also different to than elsewhere in Europe. 'Even when projected to the year 2050, allowing for the expected dramatic fall of the pensioner support ratio in Ireland, the estimated cost of maintaining our current system - with pensions indexed to wages - is still lower for Ireland in 2050 that the average cost for the EU in 2000,' Dr Whelan points out.
'So the Irish pension system is considerably less constrained by considerations of financial sustainability than our European neighbours,' he concludes.
The Chairman of the IAPF, Joe Byrne, says that Ireland's pension time bomb is the continuing erosion of good quality defined benefit schemes due in part to Government regulations on the funding standard.
'The Whelan report strongly suggests that the Government has the capacity to defuse Ireland's pensions crisis firstly by eliminating regulatory barriers to defined benefit schemes and secondly by incentivising contributions to defined contribution schemes,' Mr Byrne says.
'The Government's success with SSIAs shows that it is possible to incentivise people if approached in the right manner,' he adds.
