Ireland’s actuaries are recommending that the government make private pensions mandatory for all workers, rather than introduce a UK-style system of automatic enrolment.
The Society of Actuaries in Ireland said a compulsory pension system should be developed over the next five years as a way of increasing pensions coverage and making sure individuals have enough in retirement.
Bringing in auto-enrolment is potentially wasteful, if the government later goes down the mandatory route anyway, it said.
The recommendation is among the conclusions from a working party on pensions policy set up by the society in March 2013.
The aim was to join the debate on whether a mandatory system was better than other methods, such as auto-enrolment, to complement the state pension.
The society said it knew auto-enrolment might seem more palatable than a mandatory system in the current economic environment in Ireland.
“However, in our view, a mandatory system is superior to an auto-enrolment regime for a number of reasons,” it said.
A mandatory regime was a more effective way of increasing private pensions coverage than auto-enrolment, it said, citing international experience.
Also, a mandatory system should be easier to run since there will be no opt-out and opt-in issues, it said.
“Establishing the more complex system of auto-enrolment and subsequently introducing the mandatory regime could potentially be a waste of resources,” it added.
Because it would take at least five years to bring a mandatory scheme into operation, the society said there was a need to move ahead quickly with decision-making and planning.
Last April, the Organisation for Economic Co-operation and Development (OECD) said in a review of Ireland’s pension system that making it compulsory for private workers to establish a pension was the cheapest and most effective approach to increasing coverage of private pensions.
It said Ireland and New Zealand were the only OECD countries that did not have a mandatory earnings-related pillar to complement the state pension at basic level.