IRELAND - The Irish government has unveiled plans for a pension framework which will require the auto-enrolment of all employees aged 22 or over from 2014, along with matching contributions from the employer, and State contributions equal to 33% tax relief. The State retirement age will also be increased to 68 by 2028.

Details of the new pensions framework were released this afternoon in a 68-page document. Among the key proposals set out, the government said defined benefit pension schemes can expect stronger regulation and employees will be given access to defined contribution (DC) Approved Retirement Funds.

Some of the proposals set out broadly match the UK's planned pension reforms, including a move to introduce employer contributions matching that from the State. The total minimum pension contribution will equate to 8%, broken down as 4% from the employee, 2% from the employer and 2% from the State. However, Ireland is introducing an additional incentive of a one-off bonus if individuals contribute for more than five years without a break.

The main driver of the new framework is to encourage lower and middle income workers to provide for their own pensions, and take some emphasis off state provision, "in a reformed system that provides greater security, equity, choice and clarity", the report said.

Employees will be given the option of opting-out of auto-enrolment if they feel it is not appropriate, although existing pension members will be able to stay in existing schemes if they receive higher contributions from the employer or are members of a DB scheme. And a new single pension scheme for all public sector workers is also being introduced this year.

Complicated state provision calculations will also be replaced by a "total contributions approach" requiring a maximum of 30 years' employed service, albeit this new system will not be introduced until 2020. And homemakers ‘disregard' will be replaced with credit for new pensioners from 2012.

The existing tax relief currently provided on an individual contributor's marginal rate of tax will also be replaced by the new State contribution equivalent to 33% tax relief.

The state retirement age will be increased to 66 from 2014, then to 67 in 2012 and 68 in 2028, and individuals will be given the option of delaying their claim to state pension benefits while they make up contribution shortfalls.

And a tracing service will be set up to trace to help scheme trustees trace the pension rights of former employees. It has yet to be decided whether a State-managed tracing fund will be set up to hold untraceable accounts and dormant accrued benefits, but "consideration will be given", according to the framework report.

"While recognising the current difficulties, the Government emphasises that this
framework is a long-term strategy for the Irish pension system and it will be
implemented over time," its authors stated in the document.

"It is expected that the legislative and infrastructural developments needed for the significant reforms proposed in this framework will take between three and five years to complete," the report continued.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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