Ireland’s occupational pension system has been crying out for change for some time. The percentage of the country’s population covered by some sort of pension saving fell dramatically between 2005 and 2015, according to the country’s Central Statistics Office.
High-profile scandals such as Independent News & Media’s attempt to cut loose its defined benefit (DB) pension scheme has highlighted the lack of protection available for those who are lucky enough to be saving for retirement.
The reforms announced by the taoiseach (prime minister) Leo Varadkar (pictured above) and welfare minister Regina Doherty in February are therefore to be welcomed as long overdue. Automatic enrolment, in particular, is a positive move and has proven successful in countries such as Australia and the UK (at least so far).
On the DB side, however, Ireland’s coalation government’s plans are less clear. It has promised to push on with reforms contained in last year’s Social Welfare, Pensions and Civil Registration Bill to force schemes and employers to agree a valuation and funding plan within six months of the agreed date of the valuation.
The IORP II directive will come into force in Ireland in 2019, which should improve governance standards. Whether this is sufficient to aid the country’s deficit-laden pension funds remains to be seen.
The UK’s long-awaited DB reform paper was seen as mildly disappointing when it was published last month. The industry expected full government backing for consolidation and the ability for schemes to reduce inflation protection, but it took a softer approach.
Ireland must be careful of overpromising when it comes to what its reforms can achieve, or it will lose a golden opportunity to boost public trust in the pension system.