Workers should fund their own retirement – OECD
Posted by Old Boy
A major review of Irish pensions has recommended that workers should be obliged to contribute to pension schemes to fund their retirement.
The OECD Review of the Irish Pension System says that the best options would be either a universal basic pension or a means-tested basic pension.
These schemes would be complemented by mandatory private schemes, or “auto- enrolment” into additional pension schemes.
Over 900,000 workers have no provision for old age other than the State pension.
The OECD also recommends raising the retirement age to reflect the fact that people are living longer.
It calls for means-testing of pension related benefits like free travel and the household package.
The OECD highlights what it calls unequal treatment between public and private sector workers – with Government employees far more likely to enjoy defined benefit or guaranteed pensions.
It recommends that a cheaper public service pension scheme introduced last year for new recruits to the public service should be applied to some serving Government employees in order to secure savings sooner.
The new scheme, based on career averaging, will not deliver savings for decades when this year’s recruits begin to retire.
The OECD also recommends that any new scheme for private sector workers should be extended to the public service, while it urges legislation to improve protection for workers in defined benefit pension schemes in difficulty.
At present retired pensioners get first call on the remaining assets of the scheme, and this can leave scheme members who have not yet retired at a disproportionate loss.
It says the priority for pensioners already receiving their pensions should be eliminated.
The OECD urges caution about investing pension funds in domestic infrastructure projects, adding that supporting economic growth should not be used as an excuse to impose low returns on pension fund members.
It also states that the funding standard for pensions should be revised.
The report found that while Irish pensioners were in a comparatively good position compared to other age groups and international experience, the country’s pension framework faces challenges of sustainability.
However, it points out that there is a “misalignment” between the tax reliefs which incentivise pension saving by high earners, and the policy aim of promoting increased pension coverage for the lower paid.
The OECD also found that charges for small occupational and personal pensions were expensive.
Minister for Social Protection Joan Burton said that her aim was to ensure that all older people have a safe secure retirement, adding that the sooner the system was reformed, the better.
However, she added that she was mindful of the economic crisis, and that would inform her strategy.
Ms Burton said she intends to bring proposals to Cabinet soon.
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Posted on April 23, 2013, in activism, buisiness, Government, Human rights and Liberties, International affairs, Ireland, politics and tagged Defined benefit pension plan, Government, Ireland, Irish News, Joan Burton, Minister for Social Protection, OECD, Organisation for Economic Co-operation and Development, Pension, Scheme. Bookmark the permalink. Leave a comment.