Written answers

Thursday, 13 January 2011

Department of Social and Family Affairs

Pension Provisions

2:00 pm

Photo of Charlie O'ConnorCharlie O'Connor (Dublin South West, Fianna Fail)
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Question 177: To ask the Minister for Social Protection the position regarding the national pensions framework; his views on the current adequacy and coverage of private pension schemes; and if he will make a statement on the matter. [1859/11]

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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The National Pensions Framework which the Government published in March 2010 aims to deliver security, equity, choice and clarity for the individual, the employer and the State. It also aims to increase pension coverage, particularly among low to middle income groups and to ensure that State support for pensions is equitable and sustainable. Pension coverage is a key element in the delivery of an adequate pension in retirement. The State pension is the fundamental basis for our pension system. The Government will seek to maintain the value of the State pension at 35 per cent of average earnings. In addition, the State will also continue to promote private pensions by supporting people, through the tax system, to take charge of their own retirement needs.

At present only 50% of workers have a private pension, with low levels of coverage among those on moderate to middle incomes a particular concern. While the State pension is expected to provide sufficient income for the lowest paid workers, most people will have a significant gap if they do not have extra private pension provision. I must also stress that good pensions cost money so it is important that the level of contributions made by individuals to their pension plan is sufficient to provide the level of income they desire in retirement.

Inertia and procrastination are among the main reasons why many people do not take out private pensions. A key element of the Framework is the introduction of a new auto-enrolment system which provides a way of overcoming this problem. Employees, aged 22 or over, earning above a certain income threshold will be automatically enrolled into this new scheme, with the employee, their employer and the State all making contributions. Those employees already in a more favourable occupational pension scheme will not be enrolled. For those who are included in the scheme, contributions will only be paid on earnings above a certain minimum level and below a certain maximum. The level of these thresholds will be decided closer to the implementation date and they will be set in such a way as to ensure that the scheme focuses on those on low and middle incomes.

An implementation group chaired by my Department, was established in May 2010 to develop the legislative, regulatory and administrative infrastructure required to put the reforms announced in the Framework into operation. The implementation phase is expected to take three to five years. The implementation group is cognisant of the current and emerging economic conditions and will conduct extensive consultation on the many aspects of the framework before presenting final options to Government for decision.

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