The State pension should be removed from the Government’s annual budgetary process to leave it “less open to political pressure”. Instead, its level should be benchmarked against an index of average earnings, according to a submission to the Commission on Pensions by the Society of Actuaries.
If average earnings in the economy go up, so should the pension by the same proportion, said the society. But if annual earnings go down, the State pension should not be reduced. Rather, it should stay the same while future rises should be muted to compensate, it said.
The society argued this would allow pensioners to maintain buying power, which would happen if it were benchmarked to something like the consumer price index. But it would also allow pensioners to share in economic growth.
The society also said it remained in favour of gradually increasing the age, currently 66, at which retirees became eligible for the State pension. A previous Government plan to raise it to 67 and then 68 proved politically controversial and was a major issue in the election campaign a year ago, with left-wing parties and unions opposed to the idea.
The issue was effectively kicked to touch by the coalition for consideration by the commission, which held a public consultation that closed on Tuesday.
Action needed
In its submission as part of that consultation process, the society said it was clear “action must be taken now” to ensure younger generations were able to enjoy a State pensions system “as generous and reliable” as the one they were paying to fund today.
It warned that younger workers were less engaged on the issue of pensions and may be less likely to contribute to the consultation. It suggested their views may be under-represented and their long-term interests should be given “appropriate” weight.
It also voiced support for a previous proposal considered by the State for a “strawman automatic enrolment” system for contributory pensions, where anybody earning more than €20,000 would be automatically signed up for a pension into which employers would contribute 1-6 per cent of salary. Employees could opt out if they chose.
