Few policy issues have been studied more thoroughly by governments, present and past, than pension reform – and to less effect. Analysis and prescription has been followed by delay and inaction. Governments, by endlessly seeking advice, have bought time to consider everything about pension reform, while deciding little.
In 2009, the Commission on Taxation recommended cutting tax relief on pension contributions made by those on the higher (41 per cent) tax rate. However, successive governments have ignored that recommendation.
In 2010 the Fianna Fáil-led coalition produced a national pensions document that favoured a mandatory pension scheme. Those on low earnings without adequate pension coverage would be automatically enrolled in the scheme to ensure extra income in retirement.
In 2012, Minister for Social Protection Joan Burton asked the OECD to review Ireland’s pension policy. And last year, it too recommended an auto-enrolment scheme. However a year later, and although the Government still remains committed to the idea, no timeline exists for its introduction.
Since the financial crisis broke, major pension reform has been largely abandoned and subordinated to the task of rebalancing the public finances. The National Pension Reserve Fund has been depleted and largely used to recapitalise the banks. Tax relief has been restricted on pension contributions. The pension levy, introduced in 2011, will by this year have raised €2.2 billion to finance a jobs programme.
The Government nominally wants to encourage more people to save for a pension, while actually making it less attractive to do so. Levies have greatly reduced the incentive for savers. And the Government has extended the retirement age to 68 by 2028 and introduced other impositions and restrictions.
Various governments have raided long-term pension savings to help resolve a short-term financial crisis. That approach must change if pension reform is ever to be achieved.