Madam, – The present economic crisis has given rise to a serious gap between public spending and tax revenue. It has also made even clearer the urgent need to address the long-term fiscal consequences of unfunded public pension provision and the lack of pension security for those outside the public sector.
Instead of forcing public servants to take a pay-cut, it would be far more efficient and socially equitable to now require them to pay a realistic contribution towards their pensions. Public servants who find this not to their liking could opt to have their pensions frozen at present value and instead pay the usual contributions towards the old-age contributory pension. Such a measure would be a good first step to address both the immediate and long-term crises in the public accounts.
Meanwhile, the bonfire of the equities has substantially destroyed the value of many private pensions. To add insult to injury, the enormous tax-subsidy provided by taxpayers as an incentive to invest in these instruments has in reality only subsidised the fund-management fees of the financial institutions which have managed to lose the money of the unfortunate policy-holders.
The different crises in the public and private pension sectors can only be addressed by the introduction of a system of universal pension provision. Contributions to the scheme should be deducted from all income generated during the lifetime of every income-earner at a fixed minimum rate – with the option to pay additional voluntary contributions to boost final entitlements. Employer-contributions should be a matter of negotiation between employers and employees.
The scheme would be administered by the State and the overall fund managed by the NTMA or some similar agency. However, the individual pension accounts would remain the private property of each contributor. All contributions would be tax-deductible.
Under such a universal scheme the logic of having separate pension systems for public and private employees would no longer exist, and pension provision for all income-earners (including future public-servants) could be properly funded.
The basic State pension could remain a universal entitlement of all citizens at retirement age – but assessable for income-tax for pensioners whose aggregate income exceeds the tax threshold. – Yours, etc,