IRELAND - Brian Lenihan, the Irish finance minister, has warned the rising cost of public sector pensions needs to be "brought home to people".
Speaking at the IPE Awards Seminar in Dublin today, Lenihan noted pensions are a growing issue for finance ministers internationally as a result of increased longevity, and acknowledged that long-term measures, such as higher retirement ages, are required to make pension policy sustainable for the future.
He noted that public service pensions will cost the Irish government €2.7bn this year, but claimed the introduction of the pension levy in March was "useful to bring home to people the cost of pensions in the public sector to the taxpayer".
Lenihan added, however, that there are still concerns over the expected increase in public sector pension expenditure, from 1.6% of GDP this year to 3.6% by 2058, while the "accrued liability is very substantial".
He claimed the size of his existing liability has not been "fully acknowledged" by the public sector, and warned "we will be bringing home to people the nature of that", following a review of public expenditure.
In his speech, ahead of the budget report on 9 December 2009, Lenihan also revealed that work on the Pension Insolvency Payment Scheme (PIPS) is "almost complete". This will offer trustees an alternative option - if their scheme is underfunded and the employer insolvent - to pay the government a lump sum in return for taking responsibility to pay out pension benefits.
He told delegates: "Pensions and the whole issue of age is crucial. It is important we realise the sheer scale of the challenge pensions are facing in the years ahead, as they under huge pressure for increasing longevity."
And while he admitted pension expenditure had been impacted by the huge uncertainty introduced by the recent financial conditions and values of equities, he pointed out thast equity prices have fallen in the past and recovered
"We have to hope that the pattern of equity recovery will be repeated in the years ahead," said Lenihan.
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