State Pensions- Towards a Basic Pension for all?

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State Pensions- Towards a Basic Pension for all?

• Tony Mc Cashin
• Trinity College

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Why Discuss State Pensions?

• Share of State Pensions in Pensioners Incomes
• No debate about fundamentals
• Poverty trends
• Success/Failure of PRSAs

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State Pensions 2003
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Pension Trends 1991-2001
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of 65 below Poverty Lines
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POLICY ISSUES

• POVERTY/BENEFIT ADEQUACY
• SIMPLICITY
• GENDER EQUALITY
• REDISTRIBUTION
• CONTRIBUTORY PRINCIPLE

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A Basic Pension for All?

• Basic Income Debate in Ireland
• Single, non-taxable, unconditional Basic Income
  for all adults, funded by single flat-rate tax on
  all other income replace existing tax and social
  welfare system
• BI not introduced but idea is relevant

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A Basic Pension for All?

• Simple
• Gender Neutral
• Incentive for voluntary saving?

• Cost
• Accumulated rights
• Contributory principle

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New Zealand- Superannuation

• Currently flat-rate taxable pension (32.5-35.25
  of net earnings) for individual married
  pensioners small minority have occupational
  schemes no tax privileges for savings
• 1898 citizens pension
• 1938 Age Benefit at 60, Universal Superann. at
  65
• 1970s debate about earnings related pensions-
  introduced and abandoned

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New Zealand contd

• 1977 National Superann., PAYG funding, general
  taxation, payable at 60, individual entitlement
  (residence test), taxable, no retirement
  condition
• 1980s-1990s cuts means tests, trend towards a
  highly targeted pension
• 1998 means-tests abandoned- pension age
  increased to 65
• NZ adherence to universalism

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Citizens Pension

• Combine OACP, RP and NCOAP
• Replace with Superannuation, age 65, non-means-
  tested, taxable, payable to all individuals, no
  retirement condition
• If targeting required use NZ strategy
• Retain PRSI for a second tier pension, strengthen
  contribution-pension link

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Pros and Cons

• Simple
• Gender Neutral
• Abolishes dependancy
• Retains contribution link
• Retirement age abolished

• Cost
• Effects on saving
• Implications for occupational schemes?