Commission on Pensions should examine universal pension

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Social Justice Ireland welcomes the establishment of the Commission on Pensions, but believes that rather than being restricted to examining the future of the State Pension Age, the Commission should also look into expanding eligibility of the State Social Welfare Pension, and examine the fairness of pension-related tax breaks. The formal creation of the Commission was announced on Tuesday, and its establishment is a commitment of the Programme for Government. The Commission’s primary remit is to consider possible future increases to the State Pension Age and it is expected to include representation from employers’ groups, trade unions, civil society and academia.

Social Justice Ireland believes that Government should:

• Expand the remit of the Commission on Pensions so that it looks at more than just the State Pension Age.
• Universalise the State Social Welfare Pension, and pay it at the current rate of €248.30 per week.
• Ask the Commission on Pensions to examine the current system of pension-related tax reliefs, including the overall cost, the distribution, and the value for money to taxpayers.

The Commission on Pensions should consider the implementation of a universal state social welfare pension as a means of ensuring all senior citizens in Irish society have sufficient income to live life with dignity. This could be paid for through changes to the structure of pension tax reliefs and a modest increase in PRSI. Making entitlement to the state pension universal, and paying it at the current rate of the State Pension (Contributory), which is €248 a week, would close the gaps in coverage that exist, and help ensure that all our elderly have enough money to live a dignified retirement. The Commission on Pensions should be given an additional mandate to look into this idea.

While the state social welfare pension does a reasonable job of ameliorating poverty among Ireland’s elderly, there are still many who fall between the cracks. It is women who suffer most. Fewer women than men qualify for the state pension and those who do tend to receive less. Often these are women who have spent their lives in caring roles – something government needs to value more than it does.

At the moment, the entire thrust of pension policy in Ireland seems to be focused on the private sector, and how expanding coverage there will reduce reliance on the state in retirement. This has involved directing very expensive tax breaks towards the very profitable private pensions industry. While in theory this makes sense, the only way this policy can save the state money is if the plan is to erode the long-term value of the state social welfare pension – something that should be strongly opposed.

Yet it is the state pension which sets the floor on which the vast majority of retirees in Ireland stand. Pension-related tax incentives cost the taxpayers billions of euros every year, but benefit only those who can already afford to save for their retirement. In fact more than 70 per cent of these tax breaks go to people in the top 20 per cent of earners.

If the purpose of a national pension system is to allow a country’s elderly and disabled to retire from work without fear of poverty in retirement, it would make sense that the vast majority of resources within the system be allocated to providing a flat-rate universal pension to all those over the State Pension Age, and maintaining it at a level which allowed retirees to achieve what might be considered a socially acceptable standard of living. Instead, billions of euros are being spent on a private pension system characterised by low coverage rates and a poor record of achieving income adequacy.

Information about Social Justice Ireland’s Universal State Pension proposal can be accessed here.

An analysis of what pension tax reliefs actually achieve for the state can be accessed here.