Irish actuaries caution against pension charge cap
Irish actuaries have warned that introducing a pension charge cap could deter providers from entering the market ahead of the launch of a new supplementary pension scheme.
In its response to the Universal Retirement Savings Group (URSG), the Society of Actuaries in Ireland said it wholeheartedly supported the launch of a mandatory pension system over one that relied on inertia to attract members, and argued that the establishment of master trusts would be the easiest way to achieve the scale desired by Ireland’s Pensions Authority.
The actuarial association added that the Universal Retirement Savings System (URSS) – for which the URSG hopes to submit a proposal by the end of the year as part of government plans to boost pension provision – should be designed to be cost-effective, but must also attract a large enough number of providers to the market to stimulate competition.
“If low caps are placed on the maximum level of charges that may be applied, it may not be attractive for providers to enter the market and some other solution may need to be found for potentially uneconomic contracts.”
Although no firm plans are in place to cap the level of charges, the recently launched Pensions Council has been asked by the government to study the mater of costs.
In contrast to the Society of Actuaries, the Association of Pension Lawyers in Ireland threw its weight behind a reformed pension system based around auto-enrolment, with the Small Firms Association (SFA) also warning against a mandatory approach.
Patricia Callan, director of SFA said she accepted that the pension system was in need of changes to make sure it was fit to meet the future needs of retirees.
“Mandatory pension provision will prove costly to employees, to business and to the Exchequer, without any associated benefits in the long term,” she argued.
“As such, the willingness of both employees and employers to accept compulsory pension savings is seriously questionable.”
The Irish Association of Pension Funds offered a tacit endorsement of a mandatory system, repeatedly noting the complexities associated with an auto-enrolment approach would fall away under compulsion.
The lawyers’ association was also critical of the current and previous governments’ approach to reform, as both had offered support for an auto-enrolment-based system without offering a precise timescale for its introduction.
“This is unhelpful as it creates uncertainty regarding existing structures.”