Mandatory pension plan... a start at least

ON the surface, it is hard to pick any flaws in the new mandatory pension plan put out to consultation yesterday by Minister for Social Protection Regina Doherty. Quite simply, far too few of us have signed up for private pensions, and reliance on the State pension will see many face a severe drop in living standards, if not a life below the poverty line.

There was a time when you could expect to have a mortgage cleared in your fifties, allowing you to increase your nest egg all the way to retirement age.

In the bubble years, however, many took out mortgages over extended periods of 30 and 35 years that will see them pay for their homes all the way to their last days in work.

There are, we know, pressures on many households in the here and now, and planning for the future is seen by many as a luxury when the most pressing concerns are the bills that weekly land on the doormat. But Ms Doherty’s proposal is sensible. All workers would automatically be enrolled in the scheme, and would pay one per cent of their gross salary in the first year – 2022 – rising to 6% in year six.

The contribution would be matched exactly by employers, and the State would add an extra euro for every three euro saved.

Unlike existing occupational pensions, which often are run by the employer through a board of trustees, these funds would be managed independently, and savers would have the option of investing their money in low- to-medium risk schemes.

Opting out also is possible, but anyone doing so would automatically be reenrolled after three years, a sensible protection against the sort of inertia that also sees many of us failing to shop around for the best deals on energy costs, mobile phone packages and car insurance.

As things stand, the plan is just a socalled strawman proposal, designed to see if the wind of support is blowing in the right direction. Superficially, at least, it seems lean, uncomplicated and sensible, and offers a lot of control to savers over their futures. We await full details but, for now, we welcome the move.