Brian Cowen's speech at the launch of the National Pensions Framework
"I am delighted to be here today, together with the Ministers for Finance and Social and Family Affairs, to launch the Government’s National Pensions Framework. My colleagues will each say something about the importance of this development from their particular perspectives. However, I would like to say a few words from an overall government point of view.
"The launch of the Green Paper on Pensions in October 2007 marked the beginning of a national conversation, involving all stakeholders, on the issue of future pensions policy. This was an important and timely initiative which was undertaken in response to the emerging imperative for long-term reform in the pensions area.
"Responding to the Challenge Ireland has long benefited from a ‘demographic dividend’ on account of our relatively young population. However, things are changing – and fast. We are living longer, more productive and healthier lives. While this is good news and something to be welcomed, it does present some fresh challenges for us – challenges which should not be under-estimated.
"We know that the ageing of our population is expected to accelerate in the coming decades. At the moment there are about six people at work to support every pensioner. By 2060 that figure will be less than two. Spending on public pensions will increase from 5.5% of GDP in 2008 to almost 15% in 2050. It is obvious, therefore, that we need to radically rethink our approach to pensions policy in light of these projections.
"We need to ensure that we have a pensions system that is fit for purpose – one that is capable of ensuring adequate incomes in retirement for a larger population of older people, without placing an insupportable strain on the public finances.
"This is not an easy circle to square. That is why we have taken the time to reflect on the many options set out in the Green Paper and the many and diverse views expressed during the consultation process by employers, trade unions and pensioners themselves.
A Balanced and Fair Approach
"I do not propose to get into the detail of the Framework or the plans for its implementation – these issues will be dealt with in detail by my colleagues shortly. I believe the Framework we have devised strikes the right balance between the need to address the long-term sustainability of our pensions system on the one hand, while better protecting our pensioners now and in the future on the other.
"The inescapable truth is that we either provide for our own pension needs or we ask our children and grandchildren to bear the full cost. I believe we must ensure that the burden of provision is spread fairly across the generations.
"We must also ensure that an adequate income at the latter stages of life is available to everyone. That is why this Government has devoted significant resources to increasing the basic State Pension in recent years. Today, in this Framework, we are reaffirming the position of the State Pension as the bedrock of our pensions system into the future.
"A fair and balanced approach also relies on the acceptance of the principle of shared responsibility for pension provision. The State will continue to play its part. But individuals and their employers must also contribute. The proposed auto-enrolment scheme set out in the Framework provides a mechanism for maximising pension coverage, particularly among those on lower incomes, involving a contribution by the individual, the State and their employer.
"Our objective is to encourage and support people to provide for their retirement savings in a fair, transparent and sustainable way, including by ensuring that everyone will be eligible to receive the same level of support from the State regardless of income.
"If we are to ensure that the cost of future pension provision is fairly shared across future generations, we need to recognise that longer periods of retirement need to be supported by longer working lives. Accordingly, in common with other EU member states which have embarked on pension reform, the Framework proposes a gradual increase in the retirement age over the coming decades.
Current Economic Climate
"The finalisation of this Framework has been complicated by the recent global economic downturn which has led to a whole range of more immediate challenges in terms of:
- Restoring order to the public finances;
- Regaining our competitive edge; and
- Getting those who have lost jobs back into work.
"These are all pressing concerns for the Government and we have already taken decisive action to address these issues and to put the economy on a firm trajectory towards recovery. Pension schemes have also been badly affected by the current crisis and, over the course of last year, we devoted considerable time and effort to developing and introducing a number of important measures aimed at alleviating the pressure on schemes and addressing the position of those whose pension scheme and employer become insolvent.
"But what the last year and a half has highlighted is that we are operating in an increasingly uncertain and volatile economic environment. It is difficult to formulate long-term strategies in this kind of climate.
"For this reason, we recognise that there may be a need to accelerate some elements of this Framework and further modify others in light of developments in the years ahead. In planning for implementation we need to be conscious of evolving fiscal and economic conditions as well as potential impacts on competitiveness. We are also committed to continuing dialogue with all of the relevant interests as we take forward the implementation of the Framework.
Conclusion
"Anyone familiar with pensions will concede that it can be a difficult and complex topic to engage with. But it is crucially important to our future sustainability that we actively manage this issue now.
"The National Pensions Framework is a clear statement of intent and direction for the future by my Government. It advocates a series of important, necessary and radical reforms in this area in the long-term interests of all in our society."
You can read the full Green Paper on Pensions here.