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2010

PENSION FRAMEWORK DOES NOT MEET NEEDS OF WORKING PEOPLE

Date Released: 05 Mar 2010

The National Pensions Framework announced by Minister for Social and Family Affairs, Mary Hanafin, on Wednesday does not serve the interests of working people. The main elements of the policy are set out below, leading to the conclusion that the Government has side-stepped its responsibility to ensure an adequate income for all citizens in retirement while increasing the strain on the finances and well-being of many.

The Government's plan seeks to maintain the value of the State pension at 35% of average earnings.  This is inadequate in the view of SIPTU and Congress. Increasing the rate to 50%, rising progressively to 66% would be more appropriate as it would provide an acceptable basic standard of living for everyone.

The Framework envisages a supplementary pension system delivered through the private funds market.  Workers are thereby exposed to the vagaries of investment markets without a guaranteed return and must shoulder the high fees and charges characteristic of the industry.

Leaving aside the Union preference for an enhanced universal system of pension provision, it should be noted that the Framework's approach has little chance of delivering adequate pensions given that the overall rate of contribution is only 8%.  This mistake has been made in Australia and Ireland should not repeat the error.

It is also striking that employees are being asked to pay 4% while employers and the State are only giving 2% respectively.  The unequal burden on workers is difficult to justify in view of the uncertainty surrounding the eventual proceeds of their investment.

While it is essential to ensure full participation in preparing financially for retirement, the way the Government's framework is designed is ill-conceived and works largely to the benefit of the private pensions industry. This is particularly worrying considering the disastrous decisions of pension managers, to date, which have led to a significant erosion in pension values.

The intention to increase retirement age across the board is simplistic.  It is planned to raise the qualifying age for the State pension to 66 in 2014, 67 in 2021 and 68 in 2028 to reflect increases in life expectancy.  It does not take account of differences in vocations which involve some - for example, people in the building trade and nurses - in demanding physical labour.  While many may wish to stay in employment until later in life, it is important to adopt a negotiated and flexible approach to this issue in order to take account of health and other circumstances.

The strategy is also disappointing in its failure to deal with difficulties of existing defined benefit schemes in a comprehensive and effective way.





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