Personal Retirement Savings Accounts (PRSAs) should be scrapped and replaced by a long-term savings product along the lines of the Special Savings Incentive Accounts (SSIAs), a business lobby group said yesterday.
In a scathing attack on the pensions industry, the Irish Small and Medium Enterprises Association (ISME) claimed that PRSAs were unpopular with employees because of inadequate investment returns and a general distrust of pensions providers.
Previous studies commissioned by the Pensions Board have indicated that lack of affordability is the main reason people don't take out a pension.
The board believes workers would be more likely to take out a pension if their employer agreed to contribute and it is examining possible compulsory pension models as part of a national pensions review to be submitted to the Government later this year.
However, ISME accused pension providers of campaigning for mandatory employer contributions in order to protect their profits, without investigating the alternatives.
"Employers will not shore up an inadequate scheme, purely to assuage the pensions industry and guarantee their income, while their own employees are sold inferior financial instruments," the report says.
ISME said an SSIA-style bonus on contributions would attract more attention from the public than the current system of tax relief on contributions, especially if it was marketed in the same way as "free money". The new structure should be managed by the National Treasury Management Agency, according to the business group.
ISME said pensions were not "the be all and end all" of retirement income and should not be promoted as such. It estimated that the value of non-pension assets, including property and savings, exceeded €500 billion.
Yesterday, the second day of National Pensions Action Week, also saw a call by Pensions Board chief executive Anne Maher for consumers to consider investing the proceeds of their SSIAs in a pension when the accounts mature in 2006 and 2007.
