Mercer welcomes the announcement by The Tánaiste and Minister for Social Protection, Joan Burton T.D., yesterday (3rd February 2015) of a series of measures aimed at tackling Ireland’s low rate of workplace pension coverage, improving consumer confidence in the system, and ensuring greater efficiency and oversight of pension schemes.
Niall O’Callaghan, Partner, Mercer commented “By 2050, there are expected to be just two workers for every person in retirement compared with five workers per pensioner today. It is positive the Minister is implementing these measures to ensure Ireland has a sustainable and efficient pensions system. The measures announced by Minister Burton should be of benefit to workers and generations to come”.
Amongst a number of suggested measures the Tánaiste confirmed that work is under way between her Department and the Pensions Regulator to reform and simplify the pensions landscape. This will ensure schemes operate effectively and that there is a regulatory structure which gives pension savers confidence in the system. In this regard, Mercer believes lessons should also be learned from the UK, where contribution rules in their auto-enrolment system have generally been regarded as overly complex.
Even more importantly, MySaver, the proposed workplace retirement saving scheme should not simply be layered on top of the existing system. There are currently nine different types of DC arrangements, all with their own requirements. This complexity increases costs, reduces understanding and acts as a barrier to individuals saving for retirement. Depending on the type of DC plan and when it was set up, there are varying rules around tax treatment and the form of benefits that can be taken. As such, layers of legacy issues cause confusion and undermine peoples’ engagement with these plans.
Mr O’Callaghan commented “there is now an opportunity for the government to reform the pension rules and put in place a world-class auto-enrolment system that radically improves coverage and addresses pensions adequacy. Side by side with the development of the auto-enrolment we need to work on simplifying the system so that we enroll people into one simplified way of saving for retirement”.