Gathering told access to value of home may ease financial struggles for pensioners

Freeing up equity from homes and redirecting State funds from private pension tax breaks to public pensions were among the issues discussed by the Citizens Assembly on Saturday.

Speaking on the third day of submissions on the topic of Ireland’s ageing population UCD social policy academic Dr Micheál Collins suggested that allowing pensioners to access some of the value of their home may help to alleviate financial stress after the age of retirement.

Dr Collins outlined how the majority of old-age income is derived from the State pension of €238 per week, but 1 in 10 pensioners live in an impoverished state earning less than €230 per week individually or €382 per week for a couple.

Allowing people to access between €5,000 and €10,000 of the value of their home every year from the age of 70 would provide between €100 and €200 per week in additional resources, and would act as a buffer against financial hardship, he said.

The value of the asset can still be clawed back by the exchequer on the deceased person’s estate added Dr Collins, who likened such a policy move to the Fair Deal scheme which currently exchanges some of the value of a house for a nursing home place.

“It will reduce inheritances for some – I say so what for that – but it will increase the living standards for many older people and I think there’s an opportunity to do that there,” he said.

“It seems to be a bit mad to be honest that elderly people die and leave huge amounts afterwards relative to their standard of living in the years up their death, that’s just passed onto the next generation.

“In a sense for the last 10 to 15 years of somebody’s life they’re sitting on an asset they just leave after them and the wealth in that will have no value to them,” said Dr Collins, who stressed the need for any such scheme to be administered by the State rather than through private operators.

Funds redirected

Elsewhere, assembly members heard suggestions that relief on private pension schemes to the tune of €2.4 billion per year should be reduced and the funds redirected towards improving the weekly State pension of €238.

“We could afford to take one third away from the tax incentive we have on private pensions and reinvest that in a stronger, more inclusive, more equality-proofed State pension,” said Mary Murphy from the Irish Human Rights and Equality Commission.

“I think that will go a long way to ensuring that we all can benefit from the State policy on pensions,” she said.

Ms Murphy also raised questions about the social insurance entitlements of the growing ‘precariat’ class of employees who may not be receiving pension contributions through part-time and freelance work.

Age Action Ireland head of advocacy Justin Moran lamented the existence of a mandatory retirement age within many companies, saying ageist employment policies often foster emotional depression and frustration among workers.

“If anyone wants to tell Michael D Higgins that his work should have stopped at the age of 65 they’re more than welcome to go down to the Áras and do so,” he said.

Mr Moran was one of various speakers who suggested that public pensions should be tied to a certain economic indicator, such as ensuring that the payment is equal to 35 per cent of average earnings.

Addressing the same issue, Economic and Social Research Institute (ESRI) director Alan Barrett noted that the lack of political capital to be gained from indexing pension increases represents a stumbling block.

“One of the reasons we haven’t explicitly benchmarked pensions is that the minister loves getting up on the day of the budget and saying ‘I’m increasing pensions by X amount’, so you can imagine if it was an automatic increase he or she wouldn’t have that particular opportunity,” he said.

Major consolidation

Andrew Nugent from the Pensions Authority of Ireland told the assembly that there needs to be a major consolidation of pension schemes in order to simplify the process and encourage a greater uptake.

“Our view in the authority is instead of having 160,000 pension schemes we’d like 150 defined contribution schemes that would allow us to supervise them properly, but more importantly it would also make plans more cost efficient and effective in our outcomes for scheme members,” he said.

In his own presentation Mr Barrett played down fears of a future ‘pensions timebomb’, saying the exchequer should be able to absorb increasing demand as the country’s population ages.

Assembly members were also asked to consider the concepts of pension auto-enrolment whereby employees must opt out of a scheme rather than the current opt in model, or even a regime of mandatory enrolment given the level of inertia among Irish workers when it comes to starting a pension.

The assembly will continue to receive expert submissions over the course of Saturday before voting on a ballot of suggestions on the topic, which will then be presented to the Oireachtas for consideration.