The idea of a pension or savings bond was first floated by trade unionists early last summer. SIPTU's July 2000 document, setting out our priorities for Budget 2001, was the first "fleshed-out" proposal for a pension bond.

Specifically, we suggested Budget 2001 should provide for the issuing of a £500 (€639) pension bond to every pensioner and PRSI worker - everyone who is liable for payment of PRSI and everyone who receives credited contributions. The beneficiaries would therefore include everyone earning more than £30 a week and everyone receiving social welfare payments, credited contributions, or home-makers' credits.

Under our proposal, the £500 bond would attract interest in line with the rate of growth in gross national product. This would act as an incentive, even for pensioners, to save the bond. It would also reward savers fairly, by giving them increases in line with national economic growth.

(There should also be a guarantee of minimum future increases, just above interest rates generally, in case our current high growth rates don't last forever.)

Under the SIPTU proposal, it was envisaged that pensioners would be allowed to cash in their pension bonds immediately, if they wished, but that people below retirement age would use their pension bonds for the introduction or improvement of pension arrangements.

Alternatively, they could hold on to the bonds, eventually cashing them in to provide or improve lump sums or other retirement benefits.

This proposal pre-dated and was in no way a substitute for the pay and tax improvements subsequently sought by trade unions as part of the Programme for Prosperity and Fairness (PPF) review. The latter is concerned primarily with improving living standards now. The SIPTU pension bond proposal, however, had several purposes.

It would help protect the future living standards of today's workers and the present living standards of today's pensioners.

It would add to existing tax incentives for pensions, which have yet to draw the majority of the workforce into schemes.

The proposal would also help women, especially older women, who are at particular risk of "pensioner poverty". Only about 70 per cent of women in the workforce are members of occupational pension schemes. Despite home-makers' credits, many women working at home do not qualify for full social insurance pensions.

In his Observer column last week, Oliver O'Connor described the pension bond idea as "seriously flawed" on four grounds.

The first was that the bond shouldn't be paid "instead of tax cuts". Agreed - but that wasn't what SIPTU said. We need both. The second was that the bond would be a "circular" payment "replacing new debt for old without any new benefits". Not so. In our view it would have to be secured by real funds and real investments, properly managed.

The third criticism was that it would "seem arbitrary or discriminatory between people near retirement age". This seems to be based on the idea the bond would not be available to pensioners - certainly not SIPTU's idea.

The fourth was that it would "force people to save in one asset alone", thereby denying them the right to invest their £500 in "savings of their choice". Not quite. They could invest in different products - as long as they were pension products. But isn't that what all pension schemes do? Isn't that why they get favourable tax treatment, to encourage people to save for retirement?

I thought all the social partners and most of our decision-makers and shapers were agreed on the need to provide further incentives for pensions planning. What better time than the present, when we can see a "pensioner poverty" crisis looming and when we have the resources to avert it.

SIPTU's proposal is a multipurpose one that can be used to improve current and future living standards, encourage better pensions planning and help compensate people for this year's inflation without unduly aggravating the problem. The proposal can be fine-tuned to serve these objectives better, and constructive criticism to that end would be welcome, but not criticism based on a fundamental misunderstanding of the proposal.

Rosheen Callender is an economist with SIPTU. She is the union's national equality secretary, a member of the ICTU's executive council and a member of the Pensions Board.