The Irish Association of Pension Funds (IAPF) has made a radical call for an upgrade in the state pension which it says should be earnings-linked coupled with the introduction of voluntary 'Personal retirement accounts' (PRA) to extend private pensions coverage.

The call came as part of the association's submission to the National Pensions Policy Initiative entitled Irish pensions - at a crossroads" which was made public last month.

However, despite its call for radical action, the association believes that research conducted by the Irish Economic and Social Research Institute may have overstated the problem when it reported that 48% of the workforce was without pension coverage. The IAPF believes that re-search it sponsored suggests a figure for non-coverage closer to 25%.

Despite this finding IAPF chairman Paul O'Faherty has said that the Irish Pensions Board should be given a major role in educating people about the need to "save early and often for retirement".

The IAPF wants a phased increase over five to 10 years in the state pension to raise it from the current 26% of average earnings to 35% bringing a single person's earnings to around IR£100 a week.

Subsequently this pension would be linked to earnings and not price inflation as at present. Without the earnings link, IAPF figures suggest that the pension would decline to 19% of average earning in 20 years.

This increase would see the cost of supporting the state pension rise from 3.1% to 4.2% of GDP over the next 40 years but the IAPF contends that an increase of this magnitude is well within the capacity of the Irish economy to absorb.

PRAs would, the association says, make private pension arrangements more accessible. They would be offered by any approved financial institution and ownership would rest with the individual.

The idea is tailored to working people who do not have pensions cover and follows on from the IAPF-commissioned study into a group of 700 such people over the last 12 months.

Seventy-five per cent of respondents said that they could not afford a scheme, 64% that charges were too high, 64% that they didn't understand pensions and perhaps most significantly 54% believed that they would have enough income saved in their own lifetime not to require a pension scheme. This latter point led the IAPF to revise its estimates for non-coverage.

Commenting on the conclusions drawn from the survey, O'Faherty said: "The research emphasises a need to introduce an easy to understand low cost alternative to the traditional retirement approach. "The introduction of new PRAs addresses many of the concerns arising in the research." John Lappin"