A report by the Organisation for Economic Co-operation and Development (OECD) on a Review of the Irish Pension System has found that the “simplest, less costly and most effective way to increase coverage” is through the introduction of mandatory pension savings.
Currently in the Irish System there is no mandatory requirement for employees to contribute to a pension scheme, unless covered by a Collective Agreement (the construction REA requires contribution to the Construction Industry Federation Pension Scheme).
Currently Irish employers need only offer an option for an employee to contribute to a pension scheme if they wish and the Company will facilitate this, normally done through a PRSA scheme, however new recommendations could make it mandatory for an employee to contribute and enrol in the scheme and some have expressed concerns that this may give rise to increased levels of debt.
The other recommendation is that the Government will have to raise the future retirement age past 68 if it is to ensure sustainable, equitable cover into the future. The organisation has said that Ireland’s position on the pensionable age may not go far enough (Currently 66, and is due to rise to 67 by 2021 and to 68 by 2028).
“The good news is that financial sustainability isn’t, or doesn’t, seem to be an insurmountable challenge for Ireland, but we do point out in the report that it may be necessary to envisage further increases in the State pension age beyond 68 if we are to really bed in financial sustainability. We believe that mandatory enrolment of workers in private pension schemes would be preferable to auto-enrolment in order to increase coverage significantly and we believe that equity requires greater alignment of the pensions of public and private sector workers.”
The Irish Times have reported that Ireland’s situation compares well to other OECD countries but today just 51% of workers between the ages of 20 and 60 have pension coverage.
Understandably workers are frustrated with the new proposal as this may be another charge to their pay-slips which has already been heavily hit. Minister for Family Affairs Joan Burton commissioned the report and we will await her comments on the findings, and the potential take up from the Government.
