Costing a Universal Pension for Ireland

Gerry Hughes: Social Justice Ireland has published a detailed and fully costed study by Adam Larragy which proposes to replace the current contributory and non-contributory state pensions with a universal pension as of right to every Irish citizen and resident over the eligible age. In common with the TCD Pension Policy Research Group, TASC, the National Women’s Council, and other organisations and individuals, Social Justice Ireland argues that to avoid poverty in old age the target level for a universal state pension should be set at 40 per cent of average weekly earnings.

The study estimates that a universal pension would cost €0.7 billion more than current expenditure on the state’s contributory and non-contributory pension schemes and that this cost could be met by reducing the tax expenditure on top earners private pension schemes. The additional cost of introducing a universal pension in 2014 could, therefore, be met without imposing an extra burden on middle and lower income taxpayers and without having an adverse impact on the public finances.

Using official projections of the population up to 2046, growth and earnings, it is shown that, contrary to arguments in the Green Paper on Pensions, paying for a universal pension “would be no more difficult than funding existing arrangements”. However, a universal pension would have considerable advantages in ensuring gender equality by not penalising women who take time out of the labour force to care for children and relatives, reallocating resources from private pensions for higher earners to middle and lower income earners who derive little benefit from the private pension system, providing a secure framework in which people can plan for their retirement, simplifying the administration of the state pension system and providing older people with a guaranteed income to protect them from poverty

Prof Gerard Hughes

Gerard Hughes is an economist specialising in labour market issues relating to pensions, employment and migration. He worked at the ESRI where he was a Research Professor. A founding member of the European Network for Research on Supplementary Pensions and of the Pension Policy Research Group in Ireland, Gerard has published a number of reports on the coverage of pension plans, tax expenditure on pensions and pensioners’ incomes, as well as reports for the OECD and the ILO on private pensions in Ireland. He has contributed to and co-edited a number of books on pensions including Reforming Pensions in Europe and Personal Provision of Retirement Income.