I wanted to propose a straightforward and fair change that could be brought in to the auto-enrolment pension system, as an alternative to mandating future pensioners to buy annuities. A good solution, within a given monetary limit, might be to present an option to obtain an additional social welfare pension from the Government.
This extra pension would be paid out weekly, coinciding with the usual state pension, and would be eligible for periodic proportionate increases in line with those of the standard state pension. The policy for survivorship would fit in with the rules that apply to the normal state pension.
The annual reward from the supplementary state pension would be set at 4% of the investment amount, which seems reasonable, considering that the pension would be fully indexed, would include a survivor’s pension, would ensure weekly payouts, and would be supported by the State.
The monetary limit would be equivalent to the cost of the additional State pension at the regular rate when the pensioner retires. While this might not be an issue for those enrolling automatically, it would be important when considering extending the option to members of defined contribution pension schemes. The reason for capping the limit is to ensure that the total pension does not exceed two-thirds of the average industrial wage, a figure in line with state pension expectations across developed European nations.
What’s more, the risk presented to the State by suggesting this change would be quite small. Certainly, it seems an acceptable risk when considering the principle of social welfare protection.
-JAMES R KEHOE,
(Past President of the Society of Actuaries in Ireland)
Dublin 16.