Pension holders warned they'll be poorer in retirement than planned
Thousands of people depending on a company pension have been warned that their schemes are unlikely to be able to deliver a decent retirement.
Pensions advisers Acuvest said people managing defined benefit pensions should now be helping members to exit them, and put their funds into other types of pensions.
Alarming new figures show that deficits in the defined benefit schemes of the largest companies and semi-states have ballooned.
This means the pensions time bomb for up to 600,000 people has started to go off.
Acuvest's Rebekah Brady warned that defined benefit schemes had promises attached to them that could not be delivered.
Traditional defined benefit pensions in the private sector promise two-thirds of final salary for those with a full service. But most are unable to deliver on these commitments owing to people living longer and low interest rates.
Ms Brady said: "Defined benefit schemes are an outdated model for retirement savings and are unlikely to be able to guarantee a decent retirement income for every single member of that pension scheme."
She was responding to research from consultants LCP Ireland which showed that the combined deficits more than doubled from €2.6bn last year, to close to €7bn so far this year. A deficit means the scheme does not have enough funds to pay members their benefit entitlements.
Ms Brady said people should be encouraged to switch to a defined contribution pension.
These schemes do not make any specific promise on pension payments. Instead, what is paid out depends on the contribution to the scheme and the performance of the investment assets.
"Those managing defined benefit schemes should be helping members to take control of the situation and facilitate them saving via an alternative vehicle," Ms Brady added.
"If we want people to trust in the pensions system, let's be honest about what we can and cannot promise."