Trade unions have urged the Government to cap the tax relief on pensions for very high earners and redirect the money to low earners

With a new round of pay talks looming in the autumn, the Irish Congress of Trade Unions (Ictu) said that an overhaul of the pensions system would be one of its priorities in the dialogue with Government and employers.

Ictu warned yesterday that almost half the workforce had no private pension and said that hundreds of thousands of workers were "sleepwalking into old-age poverty".

Ictu general secretary David Begg said that workers relying on only the State pension faced the prospect of a sharp drop in living standards in their old age and the public pension would do no more than keep them from penury.

"We will put on the agenda for the next [ social partnership] agreement, if there is one, that we have to improve the pension environment significantly," Mr Begg said.

At a briefing to publish an Ictu paper to mark National Pensions Action Week, Mr Begg called for a cap on the tax relief of up €254,000 which is available to high earners.

"The top 10 per cent of earners earn 40 per cent of the benefits of relief and the cost of tax relief on pensions has escalated. The current arrangement is grossly inequitable and benefits the wealthy disproportionately." ...

Mr Begg suggested that low earners should be given a "refundable tax credit" which could be used to increase contributions to Personal Retirement Savings Accounts (PRSAs).

Stating that employers were receiving a "windfall gain" because they did not have to pay PRSI on the workers' share of the PRSA contributions, Mr Begg said that such a gain should be put back into the PRSA accounts.

Ictu's pensions expert, Fergus Whelan, said that the effect of PRSAs on pension coverage had been negligible and that it was "highly unlikely" that the 70 per cent coverage target would be met by the deadline of September 2006.

With the social welfare pension providing about 30 per cent of average industrial earnings, Mr Begg said that Ictu would be pushing to increase that rate to 34 per cent in the pay talks.

Mr Begg said the annuities provided by the private sector should be replaced with a State annuity, arguing that this would be a cheaper option because the State was not driven by a profit motive.

The Irish Pensions: Problems & Solutions paper argues that the pension system is facing a number of serious problems.

These included funding pressure on some defined-benefit schemes "which have the potential to cause schemes to fail or to be abandoned by employers".