Chartered Accountants Ireland reacts to this morning’s estimates of pensions liabilities from the Central Statistics Office (CSO)
Estimates come as auto enrolment is further delayed and Pensions Commission launches public consultation process on the future of State Pension
10 February 2021 – Estimates of pension liabilities from 2018 released by the CSO this morning, are further evidence of the scale of the pensions challenge facing Ireland, in the same week that the Government announced it will delay the introduction of auto-enrolment until at least 2023, Chartered Accountants Ireland has commented today.
Irish pension schemes had liabilities of €607.9 billion at the end of 2018, according to the CSO. The figure comprises data on occupational pension schemes and shows the amount owing to households by private employers and government at the end of 2018 based on the pension benefits they had built up to that date.
State Pension schemes account for 59% (€360bn) of the total liability. Private pension schemes equated to 21% of the total liability (€99.1bn). The liabilities equate to 186 per cent of Irish GDP at that time, compared to 167 per cent when figures were last released for 2015.
Earlier this week, it was announced that the introduction of auto-enrolment, to address the sole reliance by 40% of workers in the private sector on the state pension to fund their retirement, would not be implemented until at least 2023. Today, The Pensions Commission launched a four-week public consultation process on the future of State pensions, to ensure that it can be funded into the future.
Commenting, Public Policy Lead with Chartered Accountants Ireland, Cróna Clohisey said:
“We have seen some concerning news on the pension front in the last seven days. While it isn’t surprising that auto-enrolment has been put on hold, the lack of private pension funding isn’t going to be solved without significant action by the government. We acknowledge the establishment of the Commission on Pensions last year and today’s announcement of a consultation process by the Commission. However, the OECD told us in 2014 that urgent reform was needed and 2021 needs to be a year where Ireland moves forward on this issue with a clear and sustainable government policy.”
Auto-enrolment would see employees automatically enrolled in a pension scheme by their employers, and both employers and employees would contribute to the pension fund.
Ms Clohisey continued:
“The lack of private pension provision has been on the agenda of various governments in Ireland over the past 20 years and the only solution the State has given serious consideration is to make people work longer. This approach is simply unsustainable. Auto-enrolment is a viable answer as it incentivises people to save, reduces the risk of people entering poverty in retirement and reduces the reliance on the state pension. The combined result in the long-term will be savings for the State.”
“At the moment there are five workers for every pensioner in Ireland. By 2050, when people who are now in their thirties and forties are retiring, the number of workers will fall to two. The maths simply doesn’t add up. For young people entering the workforce today, there is increased uncertainty in terms of what they can expect from a state pension come retirement. The cost of the state pension will inevitably increase, and the scale of the pension funding problem will only grow unless more people start to save for a pension while they are earning.”
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