The Government has accepted in principle the proposals of the Irish Pensions Board to set old-age pensions at 34 per cent of average industrial earnings - almost £100 a week - and ensure that 70 per cent of the workforce aged over 30 is also covered by occupational pension schemes.
The proposals are contained in the pensions board's report, Securing Retirement Income, which was formally presented to the Minister for Social, Community and Family Affairs, Mr Ahern, yesterday.
Mr Ahern said that an interdepartmental group would be set up immediately to look at ways of making occupational pension schemes more accessible to low-paid, casual and even unemployed people, who wished to supplement their State pensions. The issue of funding significantly higher State pensions would be referred to the social partners initially, for consideration under the terms of Partnership 2000, as the funding provisions carried serious financial implications that could affect tax and PRSI rates.
The pensions board is proposing that the Government set up a special fund with a target of £31 billion by 2031, in order to to meet the huge old-age pension bill the State will face by the middle of the next century.
Mr Ahern would give no commitments on when the Government would make a decision on how the proposed higher pensions would be funded. Nor would he say when legislation would be introduced for the new, low-cost, easy access Personal Retirement Savings Accounts (PRSAs). The PRSA legislation would be part of the "next legislative cycle", he said. "There is no firm date. I am not giving any hostages to fortune."
However, he did confirm that the Department of Finance and his own department were looking at the issue of capping the tax relief available on pension investments by high earners. "More pension cover at the lower end of the scale has tax implications," he said.
The pensions board is also proposing that pension contributions should be age linked. Someone at 20 should be able to claim tax relief on 10 per cent of income for tax purposes and this figure should rise to a maximum of 30 per cent at 60 years of age.
There was a broad welcome for the proposals. However, employer bodies have warned that any rise in State pensions must not jeopardise competitiveness by increasing the tax burden on business.
The main cause of concern for bodies like the Irish Business and Employers Confederation is the proposal that the State should set aside between £250 million and £500 million a year over the next decade to fund State pensions.
IBEC's director of employee relations, Mr Turlough O'Sullivan, said at the publication of the report that, while he welcomed it in outline, one of the underpinning features of social partnership over the past decade had been to reduce tax and PRSI rates.
"Can we assume that the costs involved in pension provision will not lead to a reversal of policy in PRSI and tax rates?" he asked.
Later IBEC's affiliate, the Small Firms Association said in a statement that the best way of funding the pension reserve fund would be through measures like the sale of State assets.
Both bodies welcomed the introduction of PRSAs as a way of creating a more flexible and competitive workforce.
By contrast, the Irish Congress of Trade Unions said the Government must make every effort to bring State pensions up to the 34 per cent figure and ensure the tax burden was borne equitably by all sections of the community. It said the introduction of PRSAs must not disadvantage existing defined benefit pension schemes.
The president of the Society of Actuaries in Ireland, Mr Bruce Maxwell, voiced a similar concern for existing schemes. He welcomed the report and said it reflected his own society's submission on issues like PRSAs.
