IRELAND - Self-employed Irish workers who benefitted from the Celtic Tiger years should be allowed to draw down part of their pension savings to boost the economy, according to business association IBEC.
Arguing that unlocking as much as 25% of the estimated €15bn held in additional voluntary contribution (AVC) vehicles would provide a stimulus worth €1.8bn, IBEC was nonetheless cautious not to endorse early access to the country’s occupational pension funds.
The organisation said the main occupational schemes should not be accessible, as it would “further undermine the already inadequate pensions coverage”.
It said early access to occupational pensions to assist those in arrears with mortgage payments had been considered and ruled out by the government, but that the review at the time did not specifically consider AVCs.
“Many of the people who would have made these additional contributions’ would have done so at a time of higher earnings or from bonus payments,” IBEC said.
“Their earnings would now be much lower, and they would welcome the opportunity to draw down some or all of their AVCs to fund their living expenses.”
As a result, the group estimated that, of the €4bn that could be accessed, €600m would go straight to the exchequer, with an additional €640m coming from higher tax revenue - stemming from a 2.3% boost to consumer spending.
The organisation added that a code of practice should be designed to guarantee that drawdowns were “not excessively used for debt repayments”.
It said the central reason for allowing access to the accumulated funds would be to provide a domestic stimulus, and that it would be a crisis response that should not influence attitudes to savings or government policy.
IBEC cited an OECD paper in which the authors said early access was a possibility if limited to “accumulations well above that needed to provide comfortable retirement”.
However, in a paper published the same year as the one cited by IBEC, Pablo Antolín and Fiona Stewart came out against early withdrawal, despite the desire for such a policy being “understandable”.
In ‘Private Pensions and Policy Responses to the Financial and Economic Crisis’, the authors said: “Policies allowing temporary or early access to private pension savings - as have been introduced, for example, in Australia, Iceland and Spain and are being considered in Turkey, or have been marginally extended, as in Australia - for those in dire financial difficulties could endanger the future adequacy of retirement income.”