IRELAND – The Irish Association of Pension Funds (IAPF) has argued against the extension of mandatory pensions in a submission to the Pensions Board due to be considered by Minister Seamus Brennan.
In a statement the body has come out against the extension saying that consumers were already paying contributions through Pay-Related Social Insurance (PRSI) for the State pension.
“This should be supported by the incentivisation of additional pensions savings through appropriately targeted tax reliefs,” said the IAPF.
According to the group, not all people “have the capacity, appetite or interest” to save for retirement voluntarily or otherwise.
“The most workable solution is to incentivise voluntary Second Pillar provision to supplement the existing State pension,” said the IAPF.
They also questioned the appropriateness of a target coverage of 70% of the workforce.
“We believe it is dangerous to focus solely on the number of individuals covered by pension schemes and lose sight of the need for such individuals to accumulate an adequate level of retirement savings,” said IAPF chairman Joe Byrne.
The group pegged the target pension at 50% of pre-retirement income – something those on a basic wage could expect through the State pension.
“Rather than mandatory pension savings, the lower paid should be incentivised by allowing tax relief on pensions contributions at the top tax rate,” argued the IAPF.
The submission also addressed concerns that “the valuable level of benefits provided by defined benefit schemes in Ireland is, perhaps, only one tax/regulatory change away from total cessation.
“This could leave us in the position where only State employees enjoy the benefit of a defined benefit pension promise in the future.”
Byrne stated this situation is “unacceptable” and “untenable”.
“Our members have told us quite forcefully that the current regulatory regime, if left unaltered, will result in a dramatic reduction in defined benefit coverage in the private sector over a very short period of time.”
The IAPF has therefore suggested changes in the funding standard imposed by the Pensions Act, including the possible introduction of a new State annuity scheme.
The IAPF has said high annuity costs are “crippling” Irish pension schemes.