Varadkar warns on public sector pensions

Minister for Transport Leo Varadkar has called for changes to pension arrangements for staff in the public service.

He was responding yesterday to plans for a new universal pension scheme envisaged by the Minister for Social Protection Joan Burton.

Mr Varadkar signalled that the State may not be able to afford the cost of public service pensions in the future. He also acknowledged that many private sector workers had no pension provision at all.

“I think pension reform is long overdue. People in the public service have very secure pensions but it is not at all clear that we will be able to fund them in the future. So in reality they are not that secure and a lot of people in the private sector have no pensions.”

The Comptroller and Auditor General has estimated the cost of meeting pension payments to retired public service staff over the coming 60 years could be about €116 billion.

Beneficial

Ms Burton set out plans for a universal pension scheme which would be aimed at ensuring workers in the private sector had adequate pension cover in the future.

The scheme would come under the supervision of the National Treasury Management Agency and it is envisaged that workers, if they wish, would have to opt out of any new arrangement.

Ms Burton indicated that the proposal would be particularly beneficial for people on low and middle incomes who had little opportunity to save for a traditional type pension with their employer.

“With an auto-enrolment scheme, they would be paying a fixed amount relative to their income and the Government would also contribute to that . . . at the moment, people have the State contributory old-age pension or the non-contributory pension, but for a lot of people, that’s not sufficient to give them the kind of retirement that they envisage.”

The Minister said that the the idea is to give people an opportunity to boost the contributory old age pension, particularly people on low and middle incomes. And also those who at different stages might be in and out of work.

Transfixed

Asked whether it was the wrong time to place additional pressures on low to middle income earners, Ms Burton replied: “I think . . . we have to look forward to a period where we’re no longer, as it were, as a country and as a society, completely transfixed by the banking crisis – when we will have got past that and when the economy will be in recovery and people’s incomes will be stronger.”

She said that at that point in time it would make sense to have an auto-enrolment structure for the Republic.

“But it would be a couple of years down the track. We have the OECD looking at the whole of pension provision in Ireland at the moment and they’re due to report sometime towards the end of the first quarter next year.”

Ms Burton’s proposals were criticised by Fianna Fáil and Sinn Féin.Fianna Fáil social protection spokesman Willie O’Dea said Ms Burton’s proposals amount to “plagiarism”. Mr O’ Dea said the proposed changes had already been announced by the previous Fianna Fáil-led government on March 3rd, 2010, with the caveat that it would take three to four years to implement them, based on the assumption that the economy would improve.“The economy has disimproved, so it would be impossible to introduce an auto-enrolment scheme for the foreseeable future.”

Sinn Féin’s Aengus Ó Snodaigh claimed: “There is nothing new in the proposals, as they had previously been announced by other social protection ministers.”