Sir, – There is a simple and socially equitable alternative to requiring the purchase of annuities by future retirees within the auto-enrolment system. Within a prescribed monetary limit, allow an option to purchase supplementary social welfare pension from the State.
The supplementary pension would be added to a retiree’s normal State pension, would be payable weekly and would qualify for periodic increases to the normal State pension on a proportionate basis. It would also be subject to the same rules as the normal State pension as regards a surviving dependant’s entitlement.
The annual amount of supplementary State pension (payable weekly) would be determined as 4 per cent of the amounted invested – a reasonable cost for a pension that would in practice be fully index linked, have a contingent surviving dependant’s pension, have the convenience of weekly payment in conjunction with the retiree’s normal State pension and be State guaranteed.
The monetary limit would be the cost of a supplementary State pension equal to the prevailing rate of normal State pension at the time of retirement. This would be academic for auto-enrolment retirees but would be relevant if the option were extended to members of defined contribution pension schemes generally. The rationale behind the monetary limit is that the combined maximum of normal State pension and supplementary State pension would be about two-thirds of average industrial earnings, which would not be out of line with State pension entitlements within developed European economies.
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A key factor is that any risk to the State is minimal and certainly acceptable within the context of the principle of social protection. – Yours, etc,
JAMES R KEHOE,
(Past President of the Society of Actuaries in Ireland),
Dublin 16.