08 May 2014

Ireland, Dublin

The Irish State will increasingly struggle to afford the provision of a guaranteed pension for everyone according to Mercer’s report on “Charting the course to 2020”.  The report was launched today at Mercer’s Client Conference in Dublin, which was attended by over 160 HR, Pensions and Investments professionals representing over 75,000 members and xxx of assets under management.

Speaking on the subject of “Next generation retirement savings”, Niall O’Callaghan, Head of DC at Mercer commented “By 2020 second careers and working beyond retirement age will be more commonplace. It will become rare for individuals to move from ‘salary’ to ‘pension’ in one go”. He added “Rather, it will be increasingly common for workers to reduce their hours in their 60s and to ‘partially retire’ so that their income comprises both salary and pension”.

Mr O’Callaghan also addressed how employers will use new technologies to facilitate the accelerating move from ‘DC for pensions’ to ‘DC for all benefits’. He commented “Online benefit exchanges will enhance employee offerings: medical and other health insurances; death in service, disability and other risk insurances; and voluntary benefits and personal finance products will all be made available as the best value packages from the best name providers”.

Hooman Kaveh, Chief Investment Officer, Mercer spoke on the changing investment landscape.  Mr Kaveh commented “The trend away from traditional asset classes observed in recent years continues, driven mainly by pension schemes seeking to diversify away from equities and ensure their asset portfolios incorporate multiple return drivers. Schemes have continued to increase allocations to global strategies and more diverse mandates, including investment in alternative assets and diversified growth funds”.

In relation to DB schemes it was predicted that while the number of DB schemes will continue to decrease, the pace is likely to slow considerably. DB schemes in Ireland may number around 500 in 2020, compared with 750 at the start of 2014. Sean O’Donovan, Head of DB Risk at Mercer commented: “By 2020 well managed schemes will have implemented robust governance strategies to ensure that the benefits to be provided are sustainable in the long term. Many schemes will have de-risked their investment portfolio significantly and their funding levels will be well protected against shocks in investment returns”.

Employers also heard that, by 2020, the onus is likely to be on them to promote higher levels of pension benefit adequacy; to offer employees enhanced support, education and flexibility both before and at retirement age; and to enable employees to make sound decisions that support their evolving retirement needs. Mercer highlighted that trustees and employers who start planning now will be well placed to navigate confidently through this changing environment.