Pension Policy: New Evidence on Key Issues. ESRI RESEARCH SERIES NUMBER 14 NOVEMBER 2009

Callan, Tim and Keane, Claire and Walsh, John R. (2009) Pension Policy: New Evidence on Key Issues. ESRI RESEARCH SERIES NUMBER 14 NOVEMBER 2009. UNSPECIFIED.

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Abstract

Pension systems world-wide face major long-term challenges in providing adequate incomes in retirement to an ageing population. Ireland is no exception. While at present there are more than five people of working age for each person of pension age, by 2061, assuming pension age is unchanged, there would be no more than two. Defined benefit (DB) schemes have come under particular pressure, and a shift from defined benefit to defined contribution (DC) schemes has been evident in Ireland as in other countries. In part, this reflects the fact that DB schemes tend to place the risk arising from increased longevity on the scheme funder, whereas DC schemes limit the liability of the funder but put a greater risk on the pension-holder. The government’s Green Paper on Pensions explored how the Irish pensions system might best be reformed to address the challenges of providing adequate pensions at an affordable cost in the context of increased longevity. In doing so, it raised a number of key questions for consideration. This study is designed to provide new evidence on some of these questions, relating mainly to the structuring of tax incentives to encourage improved coverage of private pensions. Earlier this year the government introduced a “Pension-related Deduction” – more commonly called the public service pension levy. We examine the nature of this policy instrument, and how it is to be interpreted.

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