(February 17, 2012) -- The Irish Government has asked the Organisation for Economic Co-operation and Development (OECD) to review its pension system, as the beleaguered Eurozone nation struggles to emerge from recession.
The government wants to take a fresh view of the country’s pension sector in light of changing economic and demographic circumstances, Joan Burton, Minister for Social Protection, announced last night.
The Minister revealed the move in a speech at an annual dinner hosted by the Irish Association of Pension Funds (IAPF) in Dublin.
Jerry Moriarty, Director of Policy at the IAPF, told aiCIO: “A lot has been done over the past 10 years, but it makes sense to look again in the light of the economic circumstances Ireland is in.”
Ireland was one of the first countries to fall victim to the Eurozone debt crisis and has been in recession since the third quarter of 2008. It had a brief three-month growth spurt at the start of 2009, but its economy has contracted ever since.
Moriarty said: “There have been previous reviews, but our situation has changed – we used to look at the pension system with immigration in mind, now the focus is on emigration, for example.”
The pensions sector in Ireland has been through a torrid couple of decades. Once a country with a strong, well-funded defined benefit culture, a domestic stock market crash in the middle of the last decade—before the global banking crisis—reduced funding levels dramatically.
This was followed by the Eurozone debt crisis, which inflicted a killer blow to many of the defined benefit schemes. Additionally, the sovereign crisis piled pressure on government coffers, which were allocated to fund state pension benefits. In 2010, some €17.5 billion was taken from the National Pension Reserve Fund to combine with loans from other European countries and global financial institutions to bail out the state.
This week the Irish Government turned down a proposal for Irish citizens to be able to withdraw their pensions savings to help pay for day-to-day expenditure.
Moriarty said: “We welcome someone looking at the pensions sector as a lot of the previous work was done in a previous time and under previous conditions. We are lacking certainty, which is something we desperately need.”
He said the IAPF would be interested to see what the scope of the review would be, as there had been no further details given other than the announcement.
“Our only concern is that the report is just another one which goes nowhere,” Moriarty said.
A spokesperson from the Ministry of Social Welfare confirmed the announcement to aiCIO and said the decision had been made to “examine the direction of current pension policy in the light of the economic downturn and to ensure that it meets the needs of future generations. The terms of reference have yet to be agreed”.