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.”  

In this week’s Public Policy Bulletin, we delve into some of the detail of Ireland’s revised National Development Plan, which includes significant investment to prioritise sustainable public transport. We also look at the latest statistics which show that economic output in Northern Ireland increased over the second quarter of 2021 and the European Council sets out its position ahead of COP26. Irish Government publishes €165 billion renewed National Development Plan The Irish Government this week launched its renewed National Development Plan (NDP) for 2021-2030 that promises €165 billion in funding for a range of projects over a 10-year period. Speaking at the launch, Taoiseach Míchael Martin stated that the plan would “drive the next stage of [Ireland’s] post-pandemic recovery” and described it as the “largest and most environmentally conscious development plan in the history of the State”. In addition to significant investment in public infrastructure, schools, healthcare and housing, the plan includes funding to support cross-border projects and projects for rural Ireland.   Minister Eamon Ryan described the plan as putting Ireland being at the “leading edge of creating a low carbon, renewable efficient economy” adding that it will be backed up by the Climate Action Carbon Budget and the Climate Action Plan. Describing it as “the largest and greenest National Development Plan in the history of the State, Minister McGrath stated that the NDP is the culmination of significant analysis and consultation, with extensive engagement across Government Departments and stakeholders over the past year.” The NPD is a cross departmental plan with links between sectors to meet National Strategic Outcomes. Along with funding to meet climate and housing objectives the following will be allocated in the period from 2021-2025: €13bn Gross Voted capital allocation for transport projects. €5.7bn of health investment. €4.4bn for education. €2.9bn Gross Voted capital allocation for higher education. €6bn in water services infrastructure. The publication of the Plan was accompanied by research papers, investment impact case studies, progress reports and an updated MyProjectIreland Interactive Map developed in partnership with Ordnance Survey Ireland. This allows the user to navigate projects around the country, finding out what is happening in their region. Citizens can also discover what has been achieved and what is planned for their local areas by visiting gov.ie/2040 Project Ireland 2040 comprises both the National Planning Framework (NPF) and the National Development Plan - 2021-2030 . The NPF sets the vision and strategy for the development of our country to 2040 and the NDP provides the enabling investment to implement that strategy. €35 billion package to prioritise sustainable public transport in Ireland The Government’s revised National Development Plan includes measures to “transform how we travel, connect to our communities and help us halve our greenhouse gas emissions by 2030.”  Included in the plan are the following: €1 billion will be allocated to specific carbon reduction measures, including the continued delivery on improved vehicle efficiencies, incentives to encourage the switch to Electric Vehicles, EV infrastructure, alternative fuels, and demand management measures. €11.6 billion will be allocated to new public transport infrastructure €3.8 billion over 10 years will be allocated to public transport protection and renewal, helping make the transition to electric across urban fleets €360 million a year will support 1,000km of walking and cycling infrastructure by 2025, along with additional investment in greenways BusConnects, including segregated cycleways, will be rolled out in Dublin, Cork, Galway, Limerick, and Waterford A spend of €8 billion on the protection and renewal of national, regional, and local roads over the 10-year period until 2030 €5.8billion will be spent on new road investment including €675 million on new regional and local roads over the next 10 years €230m on Aviation and Maritime Safety and Security Attending the launch of the NDP in Cork Minister Eamon Ryan said: “This is a National Development Plan for a cleaner, greener, connected Ireland, a plan that supports communities and our climate goal – to cut emissions in half by 2030.  We’re making the biggest investment in transport in the history of the state – 35 billion over the decade - which will transform how we travel. This revised Plan re-orientates our investment toward greener, cleaner, and more accessible transport. It means that for every euro we invest in new road infrastructure we’re investing twice as much in new public transport.  In addition, we’re investing €360 million per year in walking and cycling infrastructure” Economic output in Northern Ireland increased over second quarter of 2021 Northern Ireland’s economic output increased by 3.1 percent over the second quarter of 2021 and by 22.2 percent compared to the same period in the previous year, according to research recently published by the Northern Ireland Statistics & Research Agency (NISRA). The Northern Ireland Composite Economic Index (NICEI) Quarter 2 2021, which is a quarterly measure of the performance of the Northern Ireland economy based on available official statistics, found that economic activity increased at a slower rate compared to UK GDP over the quarter. In terms of biennial change (i.e., growth over two years), economic output increased by 0.5 percent over the period in Northern Ireland. The statistical bulletin and associated tables are available here. European Council sets out its position for COP26 The European Council this week approved its conclusions setting out the EU’s position for COP26, which takes place in Glasgow from 31 October. The conclusions focus on the extreme urgency to increase the global response to address the climate emergency and underline the requirement for a fair and just climate transition across the world. COP26 aims to bring countries together to accelerate action towards the goals of the Paris Agreement, which entered force in 2016 having been agreed at COP21. The Agreement has two main goals. The first goal is limiting the global average temperature increase to well below 2°C above pre-industrial levels, and pursuing efforts to limit it to 1.5°C. The second goal is adapting to the unavoidable impacts of climate change while making finance flows consistent with climate-resilient development. The main goals of COP26 are to encourage parties to the Paris Agreement to lay out ambitious Nationally Determined Contributions (NDCs) towards their emission reduction targets for 2030, discuss adaptation measures, increase climate finance, and finalise the Paris Rulebook (the rules that make the Paris Agreement operational). Read more about the conclusions setting out the EU’s position.

Director of Advocacy and Voice, Dr Brian Keegan spoke on RTE's Morning Ireland in relation to the choices facing the Irish Government on the sustainability of the State Pension ahead of Budget 2022. Listen here.  

The Minister for Finance, Paschal Donohoe TD, published a report Population Ageing and the Public Finances in Ireland highlighting the likely economic and budgetary impacts of Ireland’s rapidly aging population over the coming decade and how reform is “absolutely necessary”.  The report notes the demand for demographically sensitive public expenditure such as health and pensions grow, with significant costs for the State.   Significant structural reforms are detailed as being “absolutely necessary” to meet the costs associated with population ageing in the Minister’s press release. Analysis in the report suggests that without structural reform, a large deficit will emerge, and the debt ratio will move onto an unsustainable path. The report suggests reforms such as linking the State pension age to life expectancy could significantly reduce the cost burden. The window of opportunity to address the budgetary implications of Ireland’s pension provision is said to be rapidly closing, and any delay will inevitably raise the fiscal cost of population ageing. For more information see the summary on the report.

Applications for tax approval of a pension scheme should be submitted electronically to Revenue through MyEnquiries, as per the update to paragraph 1 of Revenue’s Pensions Tax and Duty Manual Chapter 18, dealing with Pension Scheme Approval - Administrative Matters. See Revenue eBrief No. 156/21 for further details. 

The Institute wrote to Tánaiste Leo Varadkar recommending that in order to avoid confusion and tax arbitrage within the market, the current model for tax relief for pension contributions should be applied to automatic enrolment and the proposal to apply a specific State incentive model should be abolished.  We also called for a reasonable timeline for the introduction of automatic enrolment to be published immediately to give businesses and payroll operators time to develop and deploy an operational system.   Read the letter