Over the past decade each minister for pensions - and there have been four - has made addressing a medium- term national pensions crisis a major policy priority. The problem, simply stated, is that too few people of working age have made adequate financial provision for retirement. By 2021, the population aged over 65 will increase by 59 per cent; while by 2031 there will be three workers per pensioner supporting those in retirement. Today, six people are at work for every one person over 65.
The challenge facing successive governments has been to address this issue, with urgency and coherence. So far, however, the pace of pension reform has been too slow despite the wealth of data, reports and recommendations on the subject. The Government's lack of urgency on the issue has been mirrored in the slow take-up in supplementary private pensions. These provide a top-up to the State's social welfare payment and are necessary to ensure an adequate income in retirement. Between 2002 and 2005, supplementary pension coverage increased by some four percentage points to 55 per cent. That leaves many people facing the prospect of an impoverished retirement.
Over the past decade, no subject has been more exhaustively examined than pension provision. In 1998, the Pensions Board produced a study, the National Pensions Initiative. In 2006, the board carried out two further major reviews. In 2000, the Commission on Public Service Pensions issued a very detailed report. In October, the Government published a Green Paper on Pensions as a further contribution to the national debate. This week Minister for Social and Family Affairs Martin Cullen clarified aspects of his thinking on pension reform in an interview with this newspaper. The Minister said an SSIA-type pension scheme was likely to be one part of a series of recommendations aimed at increasing pension coverage.
The Government established the SSIA accounts in 2002 to encourage savings, but introduced them in parallel with its own pensions initiative, the Personal Retirement Savings Account (PRSA). That was designed to encourage workers to take out private pensions, which they failed to do. Not surprisingly, short-term savings, via the SSIA scheme, proved more compelling than long-term retirement savings, via the PRSA. The take-up on the PRSA has been derisory. And last year, the Government compounded its original pensions error by failing to give SSIA account holders a real tax incentive to convert their short-term savings accounts into long-term PRSA investments. It is time for some urgency and coherence on pension policy from Government.