IRELAND - The Irish Association of Pension Funds (IAPF) has warned that tax breaks for savings alternatives to pension schemes could encourage members to leave occupational schemes unless there is a level playing field between the two types of arrangement.

The IAPF was responding to the National Pensions Review Report unveiled yesterday by Seamus Brennan, the Irish Social Affairs Minister. The Report contains a wide range of recommendations, including the introduction of matching contributions from the Government for personal retirement savings accounts (PRSAs).

But Nora Finn, chief executive of the IAPF, says: “We believe that tax incentives should also apply to contributions to occupational pension schemes, otherwise people will be moving out of them.”

Overall, however, Finn says that the Report is a positive development.
She says: “We welcome the fact that a priority will be a comprehensive review of the minimum funding standard. We also welcome the recommendation that a state-backed annuity fund should be looked at vigorously as a possible mechanism for supporting defined benefit schemes in cases of insolvency.

“That is important because the current regime is based on a wind-up rather than an ongoing basis,” she says. “This requires schemes to put in more income than is needed on an ongoing basis, so they are funding earlier than they need to, making the business less competitive. We would like to see more flexibility to fund on an ongoing basis.”

The Report also recommends incentives for proceeds from special savings investment accounts (SSIAs) to be invested in pensions; Finn says this would avoid investors having to face an exit tax.

However, the IAPF is not in favour of making pensions saving compulsory. “We believe it would be problematic because it would generally operate at a low level and meet a coverage, rather than an adequacy, requirement,” says Finn.

The Report refers to some disagreement between Board members as to the desirability of compulsion. It is believed that one possible solution could be the so-called “soft option”, under which employees would be automatically enrolled in a company scheme, with the right to opt out.

The full Report can be downloaded from