The partnership approach to retirement issues has worked well for the country, says the IAPF
The pension environment in Ireland is in a period of radical change. This era of evolution began with the launch of the National Pensions Policy Initiative (NPPI), by the Pensions Board in 1996. Since then, we have had a series of developments that collectively will change the face of retirement provision in this country. The impact of change will become clearer and The Irish Association of Pension Funds (IAPF) will play its part fully in the development of the new emerging pensions environment in a creative and imaginative way.
National Pensions Policy Initiative
We are very pleased that the government’s ongoing reaction to the Pensions Board report – ‘Securing Retirement Income’ has been positive and encouraging. The appointment of three working groups, last year, to progress the board’s recommendations, was a very positive step. These groups have been given the responsibility of moving the board’s recommendations forward and ultimately the framing of new legislation to give effect to the board’s work. The three groups cover taxation and general reform, state pension arrangements and personal retirement savings accounts (PRSA).
The association has made submissions to these groups which have been well received, and will continue to provide support and help to the working groups on request. Our commitment to the introduction of PRSAs is absolute and we will continue to support the development process. Significant progress has been made in general, but we would urge that the other key recommendations made by the Pensions Board in relation to taxation and other changes to the pension regime not be forgotten and must be implemented if a cohesive and well regulated system is to be maintained and developed.
The continued increase in the state pension, in successive budgets, is very welcome and we would urge the government to continue with this key aspect of pension provision. We would also support the Pensions Board in its recommendation that once a level of 34% of national average earnings is reached that it be then maintained into the future.
The recent announcement by the Minister for Finance Charlie McCreevy TD, to use part of the proceeds of the Telecom flotation to create a fund to manage state pension payments in the future is very warmly welcomed by the IAPF. The decision to contribute a 1% of annual GNP is also welcomed. We do note that the amount needed to fully fund for future liabilities is in excess of the 1% announced, but we would hope that the rate of contribution will be increased and we urge the government to consider this approach in the future.
IAPF has made a major contribution to the NPPI process, to date, and we believe that we can be of considerable assistance as the process develops in the future.
Finance Act 1999
The IAPF had strongly opposed the recent changes in the Finance Act 1999 in relation to annuity purchase on the grounds that such a major change needed very careful consideration if the pensions of many ordinary people were to be protected and to avoid a pensions misselling scandal as happened in the UK. However, contrary to some views expressed in the media, the IAPF was most strongly in favour of change in the area of annuities and that some
flexibility was not only desirable but essential, especially in a low interest rate environment.
The changes made, however, are complex and expose many people whose only major source of income in retirement is their pension. We are currently working with the main social partners in Ireland, to try to agree proposals on a way forward, that will maintain the spirit of the minister’s intentions yet provide protection for those people whose pension arrangements simply do not lend themselves to these new options without putting their entire security in retirement at risk.
The introduction of the euro has impacted on pensions from an investment management perspective. The key factor has been the shift out of Irish equities as fund managers move into the Eurozone. It is still too early to assess the full impact of the euro but it will certainly impact on the asset allocation profile of Irish pension funds. In a recent survey conducted by the IAPF, 80% of trustees believed that their Irish equity weighting would fall in the coming years and 77% believed that the primary instigator of change would be the investment manager.
Demographics and the changing nature of work patterns
Ireland, as many European countries, has a changing demographic profile. The dependency ratio is expected to rise in Ireland, although given the current age profile this will fall at a far slower rate than elsewhere in Europe. We have time to plan for the increased dependency and it is for this reason alone that the Irish government has decided to begin building a separate fund to cater for future state pension liabilities.
Work patterns too have been changing with a shift to a career as opposed to job based work arrangements. This has produced an increase in contract, part-time and atypical workers. The challenge for retirement provision in Ireland is to create more flexible and simple pension vehicles that will facilitate this shift in work patterns.
We believe that the recommendation in the Pensions Board Report – to introduce a new type of pension arrangement – the PRSA, is a significant development in meeting the needs of many workers for whom the existing arrangements just do not serve. We have been very active in promoting and developing thinking in this area and will continue
to do so.
IAPF initiatives
Our new chairman Tom Finlay recently set out a series of key initiatives that would be brought forward under his chairmanship in addition to concentrating on the foregoing matters. These key priorities will be at the forefront of the IAPF’s aims and objectives during his term of office and include the
following:
Demystifying Pensions: The association is determined to be involved in the process of educating people as to the benefits of retirement provision. Our key communication channels will include our website (to be launched in November), our new pensions magazine – Irish Pensions and our normal information services. If the many ordinary people who are not saving for retirement are to be convinced of the crucial need to do so, they will need information and education in this area. We fully support the Pensions Board in this area.
Partnership Approach: Ireland has a long history of government and social partners working together in the pension environment. This has produced some excellent pension legislation, the creation of the Pensions Board and influenced strongly the National Pensions Policy Initiative. We are firmly committed to this approach and will work to foster partnership in the future.
Europe: IAPF as a member of the represents the interests of Irish pensions at this critical level.

The Irish Association of Pension Funds
Contact Name: Des Crowther
Address: 6 Wilton Place, Dublin 2
Telephone: + 353 1661 2422
Facsimile: + 353 1662 1196
Email: iapf@iol.ie
Date formed: 1973
The Irish Association of Pension Funds (IAPF) is a non-profit, non-commercial organisation. This non-commercial approach distinguishes the association from most other trade representative bodies in Ireland. What binds the membership together is this simple philosophy, to continue to promote the ongoing well-being of pension funds and their members, and they can always agree on this basic principle.
The IAPF has been at the forefront of pension developments in Ireland for the last 25 years. We have worked hard to help develop a lasting and enduring pensions system that has provided security to many people in old age. The partnership approach, working closely with the government, state agencies and the social partners, has been a key feature in this regard. Our members currently provide retirement security to over 200,000 employees, pay pensions to nearly 70,000 people who have already retired and are responsible for some IR£30bn in retirement savings. As the new age dawns, the IAPF will continue to act as the voice of Irish pensions. We will continue to contribute to the debate that has shaped and will continue to shape retirement provision in Ireland.

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