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A Universal State Social Welfare Pension for Ireland
A Universal Pension should be a right for all older people, and the Government's Pension plan is a missed opportunity
The Government’s new Pensions plan has missed the opportunity to provide a Universal Pension as a basic right to all citizens. It has also failed to address major issues around equity, sustainability and bureaucracy that have underpinned Ireland’s pension system for generations.
A Universal State Social Welfare Pension is an analysis of Ireland’s pension system and a fully costed proposal for the introduction of a Universal Pension in Ireland based on residency, not social insurance contributions.
While there are some positive aspects to its plan, the Government’s proposals would still leave many people without a pension as they grow older after many years of contributing to society. The Government’s proposals fail on the grounds of equity, sustainability and bureaucracy. This is not the best or the fairest way for Government to use its resources. The Government’s announcement is hugely significant to the future of our State. A full and robust debate needs to be had on it.
Social Justice Ireland proposes three key adjustments to the present system:
- On equity: ensure every older person who has been resident in Ireland will receive a full pension payment (unlike the current system or the Government’s proposed new system, both of which leave large numbers of older people with only partial or no pension.
- On sustainability: make the system more sustainable by standard rating employee contributions to private pensions (unlike the current system which gives tax relief at the marginal rate which results in the major benefits going to the higher paid).
- On bureaucracy: dramatically reduce the bureaucracy by having only one test for accessing the payment and eliminating the myriad of conditions that are part of the current or the Government’s proposed systems.
With an ageing population and the number of people in defined benefit schemes falling, it is clear that the shortcomings in Ireland’s pension system need to be addressed urgently. The Irish Government published their Roadmap for Pensions Reform last week, proposing a restructuring of how workers’ social insurance contributions translate into their final state pension, and an ‘automatic enrolment’ plan for private pensions.
Social Justice Ireland’s proposal shows how to fund a Universal Pension System based on residency. This would replace all other social welfare pension payments and would be funded by a restructuring of the tax relief system on private pensions and a modest increase in Employer PRSI. This is the best way to achieve a fairer and more equal Ireland. It is proposed that the Universal Pension would start at €243.30 a week, the same as the current State Pension (contributory). It would be residency based, meaning that the more working-age years a person is resident in Ireland, the higher the percentage of the full pension they receive. 40 years of residency between the age of 16 and the State Pension Age would entitle a person to the full amount.
Introducing this system in 2019 would cost the State €727m. There would be two primary mechanisms to fund this. First, reducing the rate of tax relief on private pensions from 40% to 20% and second increasing employers PRSI by 0.5%. These, along with some other smaller measures, would raise in the region of €949m, which is €200m+ more than the additional cost of the Universal Pension in 2019. The study goes on to argue that the social welfare pension should rise to 35% of average earnings and be maintained at that level in the decades ahead. The study projects the numbers forward to 2046.