The Irish Independent reports that
up to one million workers with no pension face the prospect of being forced
to take one out for the first time.
Irish Independent has also learned a key report recommends that the
contributions for these pensions should be double the original plan.
Workers, employers and the State should contribute 15pc of salary to the new
scheme, it says.
The report commissioned by Social Protection Minister Joan Burton recommends
that most of the one million workers with no pensions should be signed up for a
private scheme and given no option to leave it. The study -- from Paris-based
international think-tank, the Organisation for Economic Co-operation and
Development (OECD) -- says the most "effective and least costly" way to deal
with the mounting pensions crisis is to force cash-strapped workers to put aside
some of their wages to fund their retirement.
At present, six out of every 10 private-sector staff have no work-based
pension -- and rely on the state- contributory pension when they retire.
With the number of pensioners set to explode over the next three decades, the
taxpayer can no longer afford to keep state pensions at the current level.
This means workers will have to boost their own pensions at a time when they
can least afford to do it.
The move will be seen as a tax on middle-income workers who cannot afford to
put their own pension arrangements in place.
And employers are likely to baulk at having to stump up money to provide
pensions for staff, particularly smaller firms.
OECD officials were commissioned by the Government to tell them how to tackle
the country's pensions time-bomb.
Although the Government has yet to make a formal decision on the timeframe
and structure for the new scheme, it will be difficult for it to go against the
advice of the prestigious think-tank.
The report states that compulsory private pensions are "the least costly and
the most effective approach to increasing private-pension coverage".
Ms Burton is known to be in favour of some form of private pensions
arrangements for the more than half of the workforce who will only have the
state pension when they retire.
She has spoken of a system where those who have no private pension
are automatically enrolled in one, but can then choose to opt out.
Up to now, the expectation was that contribution levels would be
around 8pc, with workers, the State and employers all making contributions.
However, the OECD is set to recommend that middle-income people
over the age of 22, without a private pension, should be automatically
enrolled and given no opportunity to opt out.
It says lower-paid people will not have to take up the scheme as
they will already qualify for the state contributory pension and the level
of their earnings means they would not gain much from having an additional
Not allowing middle-income earners to opt out is likely to be
hugely controversial as many of those in middle-income jobs in the private
sector are already struggling to make ends meet.
The OECD is recommending that the level of contributions into the
new auto-enrolment system should be double what had previously been outlined
in government proposals.
The state pension, which is around ¿230 a week for those who have
paid sufficient pay-related social insurance (PRSI), is not seen as adequate
for a comfortable retirement. Most workers pay 4pc in PRSI.
There is also concern that just one-eighth of the population is
aged over 65 at the moment, but up to a quarter of the population will be
over that age by 2050.
The Irish auto-enrolment scheme had been due to come in next year.
At Christmas, Ms Burton said she was pressing ahead with the plan, but
stressed that it would not be introduced until the economy improves.
She said recently that auto-enrolment would be particularly
beneficial for people on low and middle incomes. It would also help those
moving in and out of different jobs, who had very little opportunity to save
for a traditional pension with their employer.
"With an auto-enrolment scheme, they would be paying a fixed amount
relative to their income and the Government would also contribute to that,"
"That would mean that by the time they retire, they could look
forward to a decent level of pension -- the contributory social
welfare-based retirement pension but also an additional amount of savings,
which would give them a bigger income in their retirement."
The State first launched a plan for an auto-enrolment pensions as
part of the National Pensions Framework in 2010.
The OECD also recommends that workers in defined-benefit schemes
should get more of the assets when the plans are wound up. At the moment,
pensioners have first call.
OECD official Paulo Antolin consulted widely with people with an
interest in pensions in drawing up the report, which will be launched on
Monday by Ms Burton and the OECD.
A spokesman for Ms Burton's office had no comment.
The Irish Independent also reports that
deposits held by
Irish banks covered by the state guarantee rose fractionally last month,
despite the fallout from the controversial Cypriot bailout.
Allied Irish Banks Group, Permanent TSB and Bank of Ireland saw deposits
increase by 0.6pc during the month to €155.6bn.
This was mainly due to strong retail deposits.
The guarantee on deposits above €100,000 expired at the end of March. The
Department of Finance said its end had no impact on deposits.
Wealthy depositors and senior bondholders took a hit under the the Cypriot
bailout, sparking fears that money could be pulled out of banks elsewhere in the
However, the figures released by the Department of Finance confirm the
bailout had no impact here.
While headline deposits increased during March, the weakening of sterling
against the euro continues to affect deposit values. About 53pc of the movement
in UK deposit values since December is attributable to unfavourable exchange
Meanwhile, the reliance on European Central Bank (ECB) funding by the banks
dropped 10pc during the month. Year-on-year borrowing from the ECB was down
about €25.8bn, or 39pc, to €39.6bn last month.
"The steady decline in reliance on ECB funding reflects the continued
strengthening of the banking system," the Department of Finance said.
The Irish Times reports that
a new insolvency service is to be launched in Dublin today and individuals with
children going to private schools and availaing of luxuries such as a second car
and satellite television may have to give them up if they seek to enter an
official insolvency arrangement to settle the debt.
The Government expects the Insolvency Service to take a firm line with
distressed borrowers on their living expenses, the argument being that many
borrowers are doing without second holidays and other luxuries to ensure they
can make their mortgage repayments.
As the newly established Insolvency Service of
Ireland prepares to accept insolvency applications from June, it is anticipated
in political circles that the first settlements could be finalised by September
or October. Such settlements will be subject to the agreement of banks and other
Minister for Justice Alan Shatter will introduce the new body at an event this
afternoon in Government Buildings at which the service will initiate an
information campaign to explain how it will go about its work. The organisation
– led by former Deloitte accountant Lorcan O’Connor – will publish guides to
debt settlements at this event. A website goes live today and the service is set
to open an information line for queries.
One of the cornerstones of the package is the
release of official guidelines on a “reasonable standard of living” for
insolvent debtors and “reasonable living expenses”. These are expected to prove
contentious given the expenditure limits they will impose on insolvent debtors.
The guidelines – drawn up in consultation with the Government – are central to
the insolvency regime as they set out how much money people will be allowed to
spend within the insolvency arrangement. This will include limits on expenditure
on items such as food and basic medicine.
Although the aim remains to impose the same basic set of criteria on all
insolvent debtors, a source briefed on the plan said it will embrace a degree of
flexibility to ensure a “sensible” approach is taken.
For example, this may provide leeway for an exam student in a private school
whose parent enters an insolvency arrangement to stay at the school.
The Irish Times also reports that AIB is planning to
reduce its cost base by €350 million annually over the next two years, the
newspaper has learned.
This would be the equivalent of 21.6 per cent of its personnel and general and
administrative expenses last year and would be the biggest cost-reduction
programme implemented by an Irish bank.
It is understood that staff have not been informed of the size of the cuts
planned by AIB over the next couple of years.
It is part of chief executive David Duffy’s plan to return the bank to
profitability. AIB recorded an operating loss of €2.84 billion in 2012. When a
number of exceptional costs are included, this loss widened to €3.6 billion.
The bank is targeting €200 million in savings from its severance and early
retirement programmes, about €35 million on pay and benefits and the rest in
other operational savings.
The project is being led by Anne Boden, AIB’s chief operating officer who joined
the bank in July 2012 and has extensive experience of financial services in the
A key part of her role is to introduce new
technologies to enhance customer service and drive efficiencies for the bank. On
Monday, AIB opened a digital concept outlet at the Dundrum Town Centre that will
trial a number of IT customer service initiatives that could be rolled out in
branches over time.
AIB has already agreed a voluntary severance programme that will result in 2,500
staff leaving by March 2014.
It had 13,429 full-time equivalent staff at the end of December 2012, including
those on paid leave. The bank is aiming to get its head count down to about
It is currently in the final stages of closing 67 branches in the Republic and
12 in Northern Ireland and Britain, and will close its operations in Jersey and
the Isle of Man by the end of 2013.
In addition, the bank is in negotiations with the Irish Bank Officials
Association on the outsourcing of about 70 IT roles at facilities in Dublin,
Belfast and Northampton to HCL.
AIB is also in talks with staff on closing its defined benefit pension scheme
and transferring them to a defined contribution arrangement. This is the subject
of talks at the Labour Relations Commission and is being resisted by the IBOA.
It is understood that such a move could net the bank a saving of €180 million.
It is proposed that AIB would make a contribution of 10 per cent to the new
scheme for employees.
Staff are also being asked to make a voluntary contribution of 2 per cent, which
would be matched by the bank.
The Irish Examiner reports that
the proposed EU-US Transatlantic Trade and Investment Partnership free trade
agreement could boost the economy by €800m per annum in increased GDP, and help
create 4,000 jobs.And one in five
companies believe the proposed partnership will result in job creation at their
firms, an Ibec member survey has found.
US and EU business leaders meet in Dublin Castle today, in parallel to a meeting
of EU trade ministers, in an effort to advance talks towards a major new
transatlantic trade deal.
The EU trade ministers meetings will be crucial in determining the likely
parameters of a new partnership free trade agreement which has the potential to
provide a major economic boost to both the Irish and global economies.
Minister for Jobs, Enterprise and Innovation Richard Bruton said assessments
made by the EU Commission and other European bodies, a comprehensive trade and
investment partnership could over time boost EU GDP by 0.5% per annum and help
create some 400,000 jobs in the EU.
“Based on those assessments, if Ireland simply benefited in proportion to the
size of our economy, a comprehensive trade and investment partnership could over
time provide gains to Ireland in the order of €800m per annum in increased GDP,
and 4,000 new jobs,” the minister said.
A new survey of Ibec members highlights the enormous benefit to jobs and
investment that a trade deal could have for Ireland.
52% of companies said a deal would lead to increased trade with the US, 20% said
a new trade deal would increase investment in their company and 19% of companies
indicated that a deal would lead to job creation in their firm.
Of those companies that currently export to the US, over half (51%) said a deal
would increase the value of these exports. 142 companies took part in the
survey, large and small, from a cross-section of sectors, including companies
that export and those that do not at present.
The Dublin Castle discussions are being chaired by president and CEO of the US
Chamber of Commerce, Tom Donohue, and president of BusinessEurope, Jurgen
Thumann, and will be attended by Minister Bruton, European Commissioner for
Trade Karel De Gucht, the leaders of European business federations and senior
European and Irish business figures.
Ibec chief executive Danny McCoy said: “A transatlantic trade deal has the
potential to kick-start new phase of economic renewal on both sides of the
Atlantic. Together the EU and US have a combined population of €800m people,
almost half the world’s GDP and a third of world trade. A deal would constitute
the most important bilateral trade initiative ever negotiated and, as a trading
nation with strong US ties, Ireland is particularly well-placed to benefit.
“The US is already one of our key export markets, a new trade deal has the
potential to significantly increase the value and volume of these exports. The
potential for job creation, new investment and economic growth is enormous.
Businesses would benefit from new opportunities, lower costs, a reduced
regulatory burden and new public procurement opportunities. It is vital that
this opportunity is seized during the Irish EU presidency.”
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