The Government should consider radical reform of the pensions system including compulsory employee contributions if a future crisis is to be averted, the Pension Board said today.
The board has recommended that a system of matching contributions rather than tax reliefs may encourage greater uptake of pensions among private sector workers.
The board also said that younger workers who may be reluctant to lock in to a long-term savings plan may find pensions more attractive if they were given access to a portion of the funds.
The board called for the introduction of matching contributions for PRSAs, higher tax relief for all personal pension contributions, reduced regulation of PRSAs and incentives for invest SSIA proceeds in pensions.
In its National Pensions Review published today, the board outlined the serious implications for the Exchequer and the wider economy as the cost of pension provision will require a greater slice of GNP.
The cost of pensions is expected to rise from 4 per cent of GNP this year to around 14 per cent of GNP by 2056. The board also warned that the cost of an adequate pension has been underestimated so even existing pensionholders may have to top up their contributions.
The lack of pension coverage among private sector workers, especially among women and younger workers, is a particular concern given the cost of future pensions.
Some 900,000 of Ireland's 2 million workforce do not have a private or work pension, meaning they will have to rely on a state pension which is currently less than €200 a week.
Speaking today, Minister for Social and Family Affairs Séamus Brennan said the pensions issue is one of the biggest issues facing this generation and transcends politics.
He said the Cabinet has already discussed the pension issue and is "at one" about the need for action. But he indicated that the Government is less unified on the course of action until a full costing of options is undertaken. Current tax reliefs on pension cost the Exchequer €2.7 billion annually.
Mr Brennan strongly hinted that a mandatory system similar to the Australian and Estonian model would be his preferred option.
He insisted there would be no further SSIA scheme, but said the success of the SSIAs had shown that the transparency of matching contributions was more attractive to the public than tax reliefs on pensions despite their parity in benefits.
Mr Brennan also announced the formation of a "Forum on Pensions" where all interested parties could contribute to the public debate. He added that the pensions issue would also be discussed at the national pay talks.