Persistently low coverage a major challenge for state
Receding pandemic is opportunity to progress recommendations of Commission on Pensions
Increasing private coverage via auto enrolment is only way to safeguard state pension
27 January 2022 – CSO statistics published this morning showing that a third of workers do not have pension coverage outside of the state pension must prompt renewed momentum towards auto enrolment, according to Chartered Accountants Ireland. The largest professional accountancy body on the island of Ireland highlighted again the pressure on the viability of the state pension, amid continued delays to pension reform. The Institute, which represents over 30,000 members noted the window of opportunity, as the pandemic recedes in Ireland, to lay the groundwork for the introduction of auto enrolment, which would see employees automatically enrolled in a pension scheme by their employers.
Commenting, Tax and Public Policy Lead with Chartered Accountants Ireland, Cróna Clohisey said:
“One third of workers remain without private pension provision and will be reliant on the state pension. Of employees with no supplementary pension cover, 45% stated that they have never gotten around to organising it or will organise it at a future date, which highlights that the issue isn’t going to be resolved without significant action by the government.
“We have long argued that the sustainability of the State Pension cannot be addressed without parallel reforms to increase private pension coverage. We welcomed last year’s recommendations by the Commission on Pensions including the need for a long-term strategy on state pension reform, delaying any increases to the State Pension Age until 2028, abolishing mandatory retirement ages and introducing automatic enrolment.”
The government is due to make further decisions on the Commission’s proposals this March, with auto enrolment potentially being introduced in late 2023. The Institute notes the time that is required to build such a system and the need for employers to have sufficient time to prepare for such changes.
Clohisey noted:
“A clear road map from government will allow the necessary consultation with employers and business groups to progress. One of the many issues that remains unclear is whether the existing and well-established model for tax relief at both standard and marginal rates for pension contributions should apply to auto-enrolment. In its absence, the operation of two tax systems between auto enrolment and private pension schemes will cause needless tax arbitrage and confusion within the market.”
Further detail on pension reform can be found in Chartered Accountants Ireland’s (under the auspices of the CCAB-I) recent submission to the Commission on Taxation and Welfare.
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