Varadkar is planning to 'grasp the nettle' of pension reform after the Budget

LEO VARADKAR IS planning to make “grasping the nettle” of reforming Ireland’s pension system a priority after the Budget.

However, the Minister for Social Protection said that introducing any kind of major change will be extremely difficult to implement.

Speaking at the Sunday Business Post pension summit in Dublin today, Varadkar said that most people are currently relying on the state pension to fund their retirement.

“Unless the overall pension system is reformed, its overall long-term adequacy and sustainability will be compromised,” he said.

“That’s why I am giving my support to the development of a new universal retirement savings system for people without supplementary retirement provision.”

The minister said that last year an interdepartmental group was set up to examine the issue of pension reform, which aims to “develop a system that provides universal coverage”.

Time for reform

He said that the group has focused on whether to develop a system that is mandatory or has an optional opt-out for all workers without supplementary retirement savings.

Varadkar did not give details as to how a new structure for pensions would work, although he said that any new scheme would be “supplementary to a state pension”.

Social Protection Minister Leo Varadkar

He added that introducing any new system “will be very complex, involve numerous policy changes, a lot of legislation and administrative difficulties”.

“It will take a number of years to implement and will need to be phased in over a period of time,” he said.

“But of course none of none of these reasons are reasons not to start now, in fact I think there is probably no better time than now to grasp the nettle of pension reform.”

He added: “I understand why it couldn’t be done during the very difficult years of the recession while people were being hit left, right and centre with pay cuts and new taxes and new charges.

“We are now into a different period, provided the economy continues to recover, where people can reasonably expect payroll taxes to fall and wage increases to become the norm again. That presents an opportunity where we can get people to start saving.”

He said that once the Budget is passed in October one of his “absolute priorities” will be to establish “an agreement and consensus around a universal pension savings scheme”.

Plans

Varadkar has previously flagged his intent to overhaul Ireland’s pension system.

In July he launched a series of proposals aimed at simplifying and improving the pensions system, including introducing higher standards for pension trustees and cutting down on the number of pensions savings vehicles.

The suggestions, outlined by the Pensions Authority, will be finalised after a public consultation. Varadkar said that the government will be “guided” by the outcome of the consultation.

The minister has recently signalled that there could soon be major changes to the social welfare system, suggesting in July that welfare payments could be linked to inflation.

Last month his department sent a survey to 20,000 self-employed people asking what new benefits they would most like to receive from pay-related social insurance (PRSI) reforms planned in future budgets.