Minister supports SSIA-style scheme to top up pensions
Varadkar says plan urgently needed to encourage more saving
A NEW SSIA-style savings scheme is Social Protection Minister Leo Varadkar’s “preferred option” to help tackle Ireland’s ‘pensions time bomb’.
Introduced in 2001, the original State-backed fiveyear SSIA plan offered a bonus of €1 for every €4 saved monthly, subject to an agreed maximum.
Now, as Ireland faces an unprecedented pensions crisis, Minister Varadkar wants a similar type of incentive for workers to pay into their own “personal” pension fund.
The plan would provide vital additional retirement cover — on top of their state pension entitlement — and employers would also be required to contribute.
“The minister’s preferred option would be an SSIA-type top-up from the Government, rather than the current system
of a tax relief incentive,” a spokesperson last night confirmed to the Sunday Independent.
“The SSIA top-up is very well understood, much more so than tax relief.
“It costs much the same, and would add to an individual’s pension income, as the money would go into their personal pension savings account.”
The fund would be made up of separate contributions from individuals, employers, and the Exchequer.
Contributions would start at a “low level” in the first year, and the fund would be phased in over a period of time.
The “favoured model” is similar to schemes in Australia, Singapore and New Zealand. Every worker would be automatically enrolled in the scheme — but could also avail of an opt-out clause.
A NEW SSIA-style savings scheme should be introduced to try to tackle our ‘pensions time bomb’, according to Social Protection Minister Leo Varadkar.
The original State-backed five-year SSIA plan, introduced in 2001, offered a bonus of €1 for every €4 saved monthly, subject to an agreed maximum.
Now Minister Varadkar wants a similar type of incentive for workers to pay into their own “personal” pension fund. The plan would give them additional retirement cover — on top of their State pension entitlement — and employers would be required to match their contributions.
“The minister’s preferred option would be an SSIA-type top-up from the Government, rather than the current system of a tax-relief incentive,” a spokesperson confirmed to the Sunday Independent.
“The SSIA top-up is very well understood, much more so than tax relief.
“It costs much the same, and would add to an individual’s pension income, as the money would go into their personal pension savings account.”
The fund would have to be phased in over a period of time with contributions starting at a “low level” in the first year.
The most favoured model would be similar to the Australian, Singaporean and New Zealand systems, and specially “tailored” for Ireland.
Every worker would be automatically enrolled in the scheme — but would have the right to avail of an opt-out clause. The fund would be the “private property” of the individual, could not be expropriated by any government, and could be inherited by a partner or family members if the worker passed away before drawing down any benefits.
It could be transferred to another jurisdiction, and there would be flexibility as to when benefits accrued could be taken out. The SSIA scheme of 16 years ago was generally regarded as a success, generating a huge national savings kitty.
Only a third of private-sector workers have a pension. During the recession years, many people sacrificed saving for their retirement as they battled to cope with more immediate bills such as mortgages, heating and food.
Meanwhile, the latest census data shows the proportion of those in the older age bracket continues to increase.
There are now 296,837 males and 340,730 females aged 65 or older in Ireland.
The number of men in this age category has gone up by 22pc since 2011, compared with an increase of 16 per cent for women. Medical experts predict improved medical care and other lifestyle changes will result in people generally living longer.
Financial studies show the demise of the traditional ‘permanent pensionable job’ as the nature of the workplace changes. Problems in many company schemes are an added complication.
Dermot O’Leary, chief economist with Goodbody Stockbrokers, suggests an SSIA-style government initiative could help deal with the ‘ticking pensions time bomb’.
He said recent census figures provided further confirmation that the over 60s segment of the population will increase in the coming years.
He suggested there would be obvious benefits to an SSIA-style scheme linked to pensions provision.