Falling between two pillars: The prospect for pensioners in Ireland?
Eugene Quinn, an actuary working part-time with the CFJ, examines issues of equity and justice in the pensions regime.
Pensions are important to everybody. There is widespread public myopia with regard to the importance of pensions, as the consequences of neglect are so distant. For the vast majority of the population however pensions will be the chief determinant of their income in their old age. Our choices now, both as individuals and as a society, will affect how we will live as we get older. Will we have enough to live with security and dignity in a society with higher expectations of life? Will there be large income inequalities between the rich and poor of our elderly?
There has been considerable public policy effort directed towards pensions over recent years. The National Pensions Policy Initiative was launched in 1996, culminating in a report from the Pensions Board entitled ‘Securing Retirement Income’ (1998) that has guided subsequent policy.
In 2000 the Government initiated the National Pensions Reserve Fund in an effort to anticipate the future shortfall in state pensions funding. The proposed Pensions (Amendment) Bill 2001 will give effect to recommendations contained in the Pensions Board report. This includes the introduction of Personal Retirement Savings Accounts (PRSA) with the aim of promoting more extensive pension coverage particularly among lower income earners.
Against the background of this current legislation and concerns over the long term sustainability of pensions due to demographic trends, it is timely to consider underlying issues of justice and equity that underpin the pensions regime in Ireland. There are two levels of analysis required:
(a) Firstly, considerations of the adequacy of state social welfare pensions and the ability to maintain the value of these pensions in real terms.
(b) Secondly, the relationship between tax expenditure on state and occupational pension schemes
"Around 60% of all eldrerly persons were living on lest than EUR 127 (£100) per week, with 90% living on less than EUR 254 (£200) per week."
A recent report by the ESRI[i] concludes that a disproportionate amount of government pensions expenditure is being directed (as tax relief) towards occupational schemes where high-income earners are the major beneficiaries in comparison with direct expenditure on social welfare pensions that benefit lower earners proportionally more.
Our primary question is whether the proposed legislation will ensure adequate provision for retirement income for all. Or will it further institutionalise income inequalities into retirement?
The current legislative changes will determine the distribution of income among our elderly for generations to come.