A Government-commissioned report has concluded that a scheme involving an increase in the State pension along with a mandatory system for those workers with no other pensions coverage would be the most practical way of tackling the country's pensions challenges.
Social Affairs Minister Séamus Brennan asked the Pensions Board in February to look at the options for the introduction of a mandatory or semi-mandatory system. The Government published the report today.
The board said the most appropriate system was a hybrid model known as Special Savings for Retirement (SSR). This would involve an increase in the State pension to 40% of average industrial earnings - from the current 33% - over 10 years.
In addition to this, the SSR would cover workers who did not have other pensions arrangements. This would require contributions of 15% of income, to be shared between employers, workers and the Exchequer. The mandatory contributions would be phased in over 10 years.
But the board pointed out that there were differing views among board members, with the Finance Minister's representative believing that the hybrid model would not be workable, because of the additional costs and economic effects.
A statement from the Department of Social Affairs said the option put forward would have significant costs, eventually adding as much as €3 billion a year or 1.8% of current GDP to Exchequer costs. There were also arguments that mandatory pensions could be viewed as a tax on labour which could affect labour costs and competitiveness.
The board's report will now feed in to a Government Green Paper on pensions policy, agreed as part of the Towards 2016 national agreement. This is expected to be published within the next 12 months.
