French public sector workers went on strike last Friday in protest at President Sarkozy's plan to change rules which allow some transport and energy workers to retire at 50 on full pension. Not surprisingly, the Irish Government's own Green paper on pensions - published a few days earlier - produced no such violent public reaction. The document contained no proposals but instead included a broad range of policy options to stimulate discussion. The Green paper may later lead to a White paper before the Government finally decides how to proceed. But that may be some years away.
The pensions problem, admittedly, is not as acute in Ireland as in France given the very different demographics. In France, more elderly people rely on the taxes of fewer in the younger working age groups to help pay their pensions. In 1995 President Chirac tried and failed to reform a financially unsustainable pensions system. France has wasted too much time before confronting the pension issue. Ireland has no time to waste but the Government shows little sign of regarding pensions as a policy priority.
At present, four workers contribute to the support of each pensioner. By 2030, that figure will drop to less than three workers while the number of those aged over 65 will have doubled to almost one million. The greatest problem to be faced, however, is that half the country's workforce have made no private pension arrangements. In retirement, they will have to rely on a State pension as their sole means of income support which will mean a sharp drop in their pre-retirement standard of living. Here, the Government has been remiss.
In 2002, its decision to set up SSIA accounts to encourage saving succeeded in one respect, while failing in another. As the SSIA scheme was launched, the Government also introduced a Personal Retirement Savings Account, a low cost facility to encourage workers to make private pension provision. The result was an inflow of billions of euro into SSIA accounts and short-term savings, but at the expense of PRSA accounts and long-term investment for retirement. The pension accounts proved unattractive and won little investor support, while the SSIA scheme captured all the savings. Earlier this year, the ending of the SSIA scheme presented the Government with an opportunity to rectify matters and to boost the take up of private pensions. It could have made the conversion of SSIA money into a PRSA investment a more tax attractive option. It failed to do so. To convince half the workforce to take out a private pension has become a much more daunting challenge.