More than two years after the Irish government first published its green paper on reforms to the pension system, the National Pensions Framework has been unveiled, proposing increases in state retirement age and auto-enrolment into pensions.
Changes to the state pension include a "simplification" of the way eligibility is calculated, so that from 2020 a person will need to make social insurance contributions for 30 years to qualify for the maximum state pension.
The state retirement age will also be increased relatively quickly, moving to 66 in 2014, before rising to 67 in 2021 and 68 years in 2028.
The reforms aim to keep the value of the state pension at around 35% of average earnings. However, to improve pension coverage the government intends to introduce a supplementary pension scheme where employees earning over a certain income threshold will automatically be enrolled from 2014, dependent on economic circumstances.
Employees can choose to opt out and members of existing schemes with higher contributions than the planned 4% from the employee, and 2% each from the employer and the state, will also be exempt. Meanwhile, those who stay in the scheme for more than five years will receive a one-off bonus payment.
However, Jerry Moriarty, director of policy at the Irish Association of Pension Funds (IAPF), warns: "While the soft-mandatory scheme addresses coverage, it does not necessarily address adequacy and there needs to be a real understanding of what that will deliver to participants."
Ray McKenna, managing consultant at Towers Watson, goes further and claims auto-enrolment combined with the changes in pension tax relief - moving to a flat rate of 33% instead of the marginal rate of income tax - "represents a very considerable threat to the financial security in retirement of future generations".
"Emphasising improvements in pension coverage at the expense of the adequacy of pension provision is simply wrong. The proposed contribution rates are, in our opinion, wholly inadequate to provide suitable income in retirement for middle-income earners," he argues.
He suggests there is an "unhealthy fixation" with trying to increase the coverage ratio of pension saving to 70% of workers "at the cost of adequacy" and argues an 8% of earnings benchmark for pension saving would be "vastly inadequate in terms of appropriate retirement provision into the future".
Other changes announced include a new scheme for public servants from this year based on career average earnings, and development of a "more secure" hybrid defined benefit (DB) fund for companies to consider when restructuring a scheme.
However, while the proposals strengthen regulation for occupational schemes, including potential powers for the Pensions Board in relation to investment strategy and scheme licensing, McKenna expressed disappointment that the DB funding standard was not addressed.
"The majority of DB schemes are now failing the statutory funding standard and they are under significant pressure. Trustees and employers in particular are reviewing their commitment to these schemes. It is the biggest threat to the future of retirement provision that the funding standard has not been addressed," he said.
However, McKenna stressed he is not calling for the standard to be removed, instead he is proposing a "more pragmatic approach".
McKenna suggests the process of obtaining approval for a funding plan should be streamlined, and there should be a "fundamental review of the standard itself, perhaps towards a more principles-based approach." He added: "This is the single most disappointing thing that is not in the framework."
Additional plans to review the range of personal pension vehicles available include extending access to approved retirement funds (ARFs) to all defined contribution scheme members and establishing a tracing service for deferred members.
Moriarty notes the IAPF has been urging the government to allow greater access to ARFs for "many years", and the idea of a tracing service is "very practical and addresses a growing issue for occupational schemes".
He says: "Generally, there is a lot of detail left to the implementation period and it is important to recognise that the level of expertise required in this area is very high."