As more people enjoy better health and live longer, they are also working longer and retiring later; partly through choice and partly through financial necessity. The Organisation for Economic Cooperation and Development (OECD), in a global review of pensions, has advised that future generations may find their pension entitlements much less generous than those enjoyed by today’s pensioners. The OECD warns that many may face pensioner poverty in their retirement years. In the past decade, most countries have raised the state pension age, and will do so again. The age of eligibility for the Irish State pension, which was previously 65, is now 66 and will be raised to 68 in 2028.
OECD secretary general Angel Gurria has clearly defined the long-term challenge facing governments: how to design flexible policies that can both adapt to the changing practices of the workplace – where a job for life is no longer the norm – while also ensuring that retirees have adequate living standards. The rise in temporary employment, the greater use of short-term contracts and the greater financial uncertainty generated by these labour market changes, have had a negative impact. Workers are less inclined to contribute to a pension and consequently are less likely to secure an adequate retirement income.
Economic recession and the lack of a coherent Government policy on pensions have taken their toll on pension savings – with more than €2 billion taken out of private pensions via the Government levy. In addition, the closure of many defined benefit – final salary – schemes has seen members face a large drop in their retirement earnings. Both developments have sapped the confidence of pension savers. The OECD, at the Government’s request, reviewed national pension policy and recommended the introduction of a mandatory pension scheme. Its review was published more than3½ years ago. However, the report of a Government working group on that recommendation has yet to be completed, a measure of the Coalition’s own lack of urgency and seriousness on pension reform.