Written answers

Tuesday, 19 November 2013

Department of Social Protection

Pension Provisions

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Independent)
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328. To ask the Minister for Social Protection if there is a pensions framework in place for the next 30 years; and if she will make a statement on the matter. [49119/13]

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Independent)
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337. To ask the Minister for Social Protection if she will confirm when there will be a White Paper on pensions; and if she will make a statement on the matter. [49169/13]

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Independent)
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340. To ask the Minister for Social Protection if her attention has been drawn to the Kiwisaver programme currently operating in New Zealand; her plans to introduce a similar programme here; and if she will make a statement on the matter. [49176/13]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I propose to take Questions Nos. 328, 337 and 340 together.

Over the past number of years, pension provision in all its forms in Ireland has experienced considerable challenges and change. The sustainability of the wider system is a particular concern because of the demographic issues Ireland faces and the associated increases in pension (and other age related) costs, and due to investment losses and the deterioration in the public finances since the recession.

Key drivers of reform have included the need to achieve sustainability of our systems over the longer term whilst also striving for adequacy in those systems. This has included reforms to the State pension and public sector pensions and effort to increased supplementary pension coverage whilst working to ensure the continued viability of defined benefit pension schemes.

The National Pensions Framework was published in March 2010 and provided a framework for long term pension reform. It encompassed consideration of all aspects of pension reform including the State pension, supplementary occupational and private pensions and public sector pensions.

Development of the framework was informed by the range of views raised during the Green Paper consultation process. A number of the reforms set out in the National Pensions Framework have been implemented recently, including the increase in the State pension age, and more will be implemented in the coming years. These reforms are designed to enhance the sustainability of the system overall and ensure that people’s income in retirement is protected.

Since the publication of the Framework, it became necessary to further consider pension reform given the economic difficulties and deterioration in the public finances. In this regard, and at my request, in 2012 the Government engaged the Organisation for Economic Co-operation and Development (OECD) to conduct an independent review of long term pensions policy in Ireland.

This review was published in April 2013 and encompasses the totality of pension provision in Ireland – State, private, occupational and public sector. The issues of sustainability; adequacy; modernity; and equity were central to this review. Whilst endorsing pension policy reforms undertaken to date, the report makes a number of recommendations for future reform. The OECD’s key recommendation is to improve the adequacy of pensions by increasing coverage in the funded part of the pensions system through a universal mandatory or quasi-mandatory employment based pension system.

In this regard, you will be aware the Programme for Government includes a commitment to reforming the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers. I have previously stated that a soft-mandatory approach such as that envisaged by an auto-enrolment scheme, using scale to achieve greater cost efficiencies for the member, is a very proactive way in which we can increase supplementary pension coverage, though it is recognised that introduction of such an initiative would be best supported by a more favourable economic environment than is currently the case.

The Kiwisaver Programme currently operating in New Zealand is an example of such an auto-enrolment scheme. Studies of this scheme, and others internationally, have shown that significant increases in pensions coverage can be obtained from such systems. In addition, the significantly larger economies of scale that result from such schemes have the capacity to achieve more competitive charging structures, which in turn would lead to improved returns for consumer members. As was highlighted in the Pensions Charges Report 2012, this type of arrangement could assist in resolving the difficulties inherent in the current Irish scheme structure of a proliferation of small schemes paying considerably higher charges than larger schemes, ultimately eroding the value of the pension received by the member.

While it is not planned to publish a white paper on pensions in the near future, analysis of the options available is on-going in my Department and I will be bringing proposals to Government as to how the OECD review will inform further developments in the area of pension policy.

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