IRELAND – The OECD has given its strongest indication yet it will recommend the introduction of auto-enrolment in its forthcoming review of the Irish pension system.

Speaking at the Irish Association of Pension Funds' (IAPF) annual benefits conference in Dublin earlier this week, lead author of the review, Edward Whitehouse, said the OECD's view was that auto-enrolment was the "sensible third way" between compulsion and a voluntary pension system.

The review, announced in late February by minister for social protection Joan Burton, gave the think tank a remit to cover the "totality" of the Irish pensions system – with soft compulsion and greater domestic investment by occupational funds two of the areas it asked to be examined.

Whitehouse, head of pension policy analysis at the OECD, discussed a number of issues at the IAPF event, noting that the country's partially funded state pension system was no longer "financially sustainable".

He said the path towards actuarial equilibrium of the Social Insurance Fund (SIF) – according to a recent review set to report a €26bn annual shortfall by 2066 and a total shortfall in excess of €320bn – would be to double current contribution rates to around 28%.

Discussing the country's agreed pension age increase to 68, he added: "It makes sense for Ireland that, once 68 is reached, further increases in the pension age are legislated, which would link that to life expectancy."

Such automatic increases have already been introduced by the Danish government – resulting in a predicted retirement age of 69 by 2050 – and are under consideration in the UK.

However, Whitehouse previously warned that such automatic mechanisms were only of use if the government of the day stood by the changes it triggered.

At the Dublin conference, he further indicated that the OECD was in favour of auto-enrolment policies, something for which both the incumbent and previous Irish governments have voiced its support.

It is possible that the policy fell by the wayside due to a clause in the 2010 National Pensions Framework saying that it should only be introduced in 2014 if the economic situation allowed for the change.

Whitehouse told delegates at the conference: "There is a challenge there with both how many people are covered by private pensions and how much they are saving – and so I've asked the question 'is automatic enrolment the way forward?'

"Our general view is that auto-enrolment is the sensible third way between having compulsory private pensions on the one hand and an entirely voluntary pension system on the other hand."

The former journalist added that any such policy should be reviewed five years after introduction, and if a country had not managed to increase coverage "significantly", then a move to a compulsory system "may be necessary".

However, despite noting that the Irish SIF faced issues over underfunding, he praised the overall pension system, saying it was "a well-diversified system".

"We argue very strongly that pension systems do need to be diversified," he said, "particularly the costs of the different risks and uncertainties faced both by individuals and by economies and societies as a whole in terms of financial, economic, demographic risks and uncertainties."

The OECD is expected to submit its report to the government towards the end of the year, with a final version being released in January 2013.