IRELAND - The Society of Actuaries in Ireland has called for an increase in the state pension, paid for by a rise in social security contributions, rather than introducing mandatory saving into a defined contribution (DC) scheme.

In its response to the Irish government's Green Paper on Pensions, published in October, the Society of Actuaries claimed increasing the state pension would be the "best way to provide a higher minimum level of retirement income for all".

The Society also suggested the state pension age should be increased gradually, from the current age of 66, to take into account increasing life expectancy as well as offset some of the additional costs of raising the state pension, though it claimed 15 years notice should be provided ahead of the first rise in the state pension age.

Philip Shier, president of the Society of Actuaries in Ireland, said raising the retirement age was a "sensible' proposition, which has already been announced in several other European countries, including the UK, but recommended it should increase by at least one year per decade in order to keep pace with longevity improvements.

To enable a more flexible workforce, the organisation also proposed individuals be allowed to draw their state pension early at a reduced level, or to defer it if they are still working at the state pension age, in return for an increased amount at a later date.

Shier added: "There should also be greater flexibility for occupational pension scheme members who should be allowed the facility to draw a pension while continuing to work part-time. This would help a transition to a higher state pension age and higher normal retirement age under occupational pension schemes."

The organisation's response focuses on three themes of "adequacy, sustainability and security", with the submission stating for individuals to receive adequate pension provision, "the most effective approach is to raise the State pension, rather than introduce mandatory or 'soft mandatory' saving under DC arrangements".

It added this would be the "simplest approach to administer and the most cost-effective" although it admitted this would result in an increase in social insurance contributions and "inevitably, the increased costs will be borne, directly or indirectly, by employers and employees".

The organisation also recommended the government set a long-term level of state pension - expressed as a percentage of national average earnings - instead of it being a political decision on a year-by-year basis.

In addition, the response also focuses on the defined benefit (DB) system, which it claims "over-promises and under-funds", with the organisation calling for increased transparency and a new regulatory model similar to other EU countries which would apply a "more rigorous minimum funding regime".

DC schemes are also mentioned in the report, with the actuaries recommending further "education and communication initiatives" should be a "key priority" in tackling the widespread lack of awareness about contribution levels and investment strategy.

Gerry O'Carroll, chair of the Society's pensions committee, said: "The Society of Actuaries is not pursuing any particular political or sectoral agenda in putting forward these views."

The organisation's submission has been published ahead of a pensions conference in Dublin, opened by Mary Hanafin, minister for family and social affairs, which marks the end of the green paper's consultation process.

Hanafin said: "At present we have almost six workers for every person of pension age. By 2060, we will have fewer than two. This huge shift has already started and will put increasing pressure on the State pension system."

"Over one million, or nearly half of all workers, do not have a private or occupational pension and may be entirely reliant on the state pension when they retire. Both these factors mean that action must be taken now to ensure that today's workers will not face a huge pensions gap when they retire," she added.

The green paper sets out a number of possible options for the future, including improved tax incentives for private and compulsory pensions, the role of regulation and the introduction of mandatory or 'soft' mandatory pension saving.

Following the end of the public consultation, Hanafin revealed she expects the government to announce a new framework for future pensions policy by the end of 2008.

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