Call for pensions to be available for home purchases (Irish Examiner)
This is according to the Irish Association of Pension Funds (IAPF) which said one of the biggest disincentives to pensions is that people have a fear of locking money away for long periods.
“Many of today’s generation find it hard to grasp the need to plan for something that may be 30 or 40 years away,” said IAPF chairman, Patrick Burke.
He added that allowing an advance drawdown for the purchase of a home or other priority could be made tax neutral by reducing the tax free element at retirement.
The IAPF response to the Government Green Paper on pensions also urges greater flexibility in determining retirement age.
It said the report estimates that a 25-year-old entering the workforce with average contribution rates could need to continue to work and make contributions on a full-time basis until age 75 in order to accumulate a fund sufficient to secure a pension of 50% of salary.
The introduction of mandatory or soft mandatory pensions, say the IAPF, also has the potential to undermine the existing system and cause havoc for private sector workers.
“Consumers are already obliged to make mandatory contributions under the State pension scheme. The big danger is that an additional mandatory system would set a benchmark below current levels in terms of contributions and benefits,” said Mr Burke.
The IAPF also recommends that the Government’s tax incentives should be applied as a direct contribution from the Government, in a similar way to the SSIA rather than though the system of tax relief.
It said research shows that consumers do not understand the benefit of tax relief and a direct contribution would provide greater transparency.
“We believe the best approach is to increase the number of people with good pensions using simple and proven incentives while ensuring that the Social Welfare Pension is sustainable and delivers a basic standard of living to all,” said Mr Burke.