IRELAND - Mary Hanafin, minister of social and family affairs, has admitted the National Pensions Framework being developed by the government will not be introduced immediately, in order to minimise pressure on the pension industry.
The pensions framework is still to be published as Hanafin noted the assumptions made in the Green paper in 2007, on issues such as GDP and employment, are "no longer valid".
Her comments followed the publication of a study by the Economic Social and Research Institute (ESRI) - 'Pension Policy: New Evidence on Key Issues' - which argued changing tax relief on pensions to a standardised rate "could help to achieve the overall objectives of public pension policy in a more efficient and equitable way".
It stated an increase in tax relief from the standard rate to 30% - a hybrid of the two existing tax levels similar to the 33% rate recommended by the Commission on Taxation - would result in a gain of €500m a year to the Exchequer. (See earlier IPE article: Ireland proposes reform of pension tax relief)
Hanafin said the report was "timely and valuable as the outlook for pensions has changed dramatically since the launch of the Green Paper on Pensions". This has resulted in the recent measures introduced by the government on changes to wind-up priorities, flexibility on recovery plans and the establishment of a Pensions Insolvency Payment Scheme (PIPS).
However, she added in a statement that while the National Pensions Framework being worked on by the government will set out a plan for the future, it will "not have an immediate implementation". Hanafin pointed out the government is "anxious that there would be no further pressures on people or the industry and there will have to be a lead-in time for any proposed changes which impact on the individual, the employer and the State".
Jerry Moriarty, director of policy at the Irish Association of Pension Funds (IAPF), said this approach "makes perfect sense" as both pension schemes and individual workers have experienced significant upheaval in the past 18 months "and bringing in radical changes could just add to that".
He also warned "many of the recent proposals, particularly around tax relief, have clearly not been fully thought through and there has been no impact analysis carried out. We need concrete proposals so that we can deal with the issues facing the country around ageing and pensions coverage and adequacy. However, we also need to ensure those proposals can be implemented in a way that ensures they have positive outcomes and no unintended consequences."
The government published the Green Paper on Pensions in October 2007, and a report on the issues raised by the consultation was issued in September 2008. However, it is still unclear when the final pensions framework will be unveiled, with even Hanafin admitting in October 2009 that she expected it would have been published by now. (See earlier IPE article: Commission on Retirement must halt pension delays - IAPF)
Moriarty added: "It has never been clear what the timetable for implementation was likely to be and I think to a large extent that does depend on how radical or different the proposals are. The Commission on Taxation referred to implementing their proposals in a more stable pensions and economic climate. But the reality is that Ireland is still some way off both of these."
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