This week’s call by the Commission on Pensions for the early introduction of an auto-enrolment pension savings scheme is an important reminder of the scale of the challenge of pension provision in the coming decades in Ireland, according to Chartered Accountants Ireland. The proposal was part of a series of recommendations set out by the Commission on Pensions following their examination of the sustainability of the State Pension.
A survey this year of some of Chartered Accountants Ireland’s 30,000 members, recorded 93 percent support for the introduction of auto enrolment, a scheme under which workers would automatically be enrolled in a pension scheme, with contributions by employers, employees, and the state. In February 2021, the Government announced that its introduction would be delayed until at least 2023.
Commenting, Cróna Clohisey, Public Policy Lead with Chartered Accountants Ireland said:
“It has been our position for years now that reforms to enhance the sustainability of the State Pension cannot take place without parallel reforms to increase private pension coverage in Ireland, which at the moment is around 60 percent. The scale of the pension funding problem will only grow unless more workers start to save for a pension.
“Starting the lengthy process of introducing auto-enrolment as a matter of urgency is the obvious answer to what is already a huge problem. This scheme will incentivise people to save and that in turn will reduce the reliance on the State Pension and therefore enhance its sustainability.”
When it comes to the State Pension age, the Commission recommends gradual incremental increases of three months each year starting in 2028, reaching 67 in 2031, with further increases of three months every second year reaching 68 in 2039.
Commenting Ms Clohisey said:
“Minister Humphrey has stated that the Government will not make a decision on these proposals until March 2022, and while we understand the widespread impact that these proposals would have, the further delay is regrettable. Based on the State’s history of addressing pensions policy, by the time any changes are implemented, we fear that 2028 will not be very far away.
“Workers approaching State Pension age, many of whom will have already worked for in excess of 40 years, deserve clarity on what age they can become entitled to the State Pension so that they can plan for their retirement. Therefore, we are urging the Government to expediate decision making on the State Pension Age in particular.”
The Commission on Pensions’ recommendations also contained proposals to abolish mandatory retirement and allow workers to continue in employment until they reach State Pension Age if that is what they wish to do, a proposal welcomed by Chartered Accountants Ireland.
Commenting Ms Clohisey said:
“Increasing the State Pension age without also addressing the issue of contractual retirement ages will also put pressure on the State’s finances as many workers have to bridge the gap to the State Pension by availing of the Benefit Payment for 65-year-olds. The Commission’s recommendation to align retirement ages in employment contracts with the State Pension age will help bridge this gap but for those who wish to retire at 65 years however, the State Benefit Payment for these individuals should continue.”
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