16/7/2009
By Sophie Baker
Mergers between the Pensions Board and the Financial Regulator, and the Pensions Ombudsman and the Financial Services Ombudsman, have been recommended in the Irish government's much-anticipated Report of the Special Group on Public Services Numbers and Expenditure Programmes.
The report, more commonly known as An Bord Snip Nua, also recommends that the retirement age for State pensions be increased in an answer to the current funding crises, which the report says is mirrored by similar problems in private sector schemes. A sharp rise in longevity is highlighted as one of the biggest drivers of pensions' funding crises, and changes in the country's demographic profile means fewer workers are supporting payments for a growing number of pensioners. Any increase in retirement age for State pensions would be phased in over a number of years.
The suspension of payments to the National Pensions Reserve fund, set up in 2001 to meet as much as possible of the costs of Ireland's social welfare and public service pensions from 2025 onwards - when these costs are projected to increase dramatically due to the ageing of the population - also features in the report as a recommendation.
The report also looks at the possibility of public sector pension reforms, and states that it recommends that the options outlined in the Government's 2007 Green Paper on Pensions be pursued and implemented, with modifications. These include raising the minimum public service pension age, increasing the rate of pension contributions from staff, modifying the earnings-linking of pensions, the removal of fast accrual terms, and the moving to the calculation of pensions on the basis of "career average" earnings. The modifications and additions include the reinstating of a mandatory retirement age, and better transparency regarding the true cost of accrued pensions arrangements. It also says there should be a move away from full earnings-linking of pensions to include inflation-indexing, as seen in other European Union countries.
Minister for Finance, Brian Lenihan, T.D., said: "I recognise, and the Government recognises, that the choices facing us are not simple or pain-free. Following them through requires a collective social effort and not one motivated by protecting one's patch or pursuing one's special interest to the exclusion of all else.
"That is why I would ask people to read the Report carefully and critically, and avoid knee-jerk and defensive reactions to each and every suggestion raised by the Special Group. All of us, including those of us in public administration, will have to accept that the old ways of doing things need to be looked at afresh, so that we can deliver excellent public services with the dramatically lower level of resources now available."
