Workers without pension to pay automatically into new retirement scheme
Published 19/07/2016 | 02:30
Workers without pensions would be automatically signed up to pay hundreds of euro a month into a new retirement fund scheme under new Government proposals.
Social Protection Minister Leo Varadkar told the Irish Independent that he hopes to have the details of a workplace pension saving scheme agreed by next year, although it may take up to 10 years to bring in legislation.
Workers will have the ability to opt out but it is hoped many will prefer to stay in.
Mr Varadkar said workers could put part of a pay rise - or former Universal Social Charge cash as it is phased out - into their retirement pot. The minister also said it "would make sense" that employers match employees' contributions under the scheme, although he did not want to prescribe what the final scheme would look like.
It is "an essential objective" of his to bring in a new, universal workplace retirement saving system for employees without supplementary pensions.
He said the current system where most people relied solely on the State pension in retirement was "unsustainable" and the Government had a duty to put a better system in place.
Experts calculate a typical 35-year-old worker would need to contribute more than €300 a month to provide a worthwhile pension.
Mr Varadkar said there was no plan to push the age at which people qualify for the State pension beyond 68.
He said that to deliver the new pension scheme there was a need to reform and simplify the pension landscape.
Pension savers' confidence had been "seriously damaged" and had to be repaired if reforms were to be successful.
He was speaking at the launch of a Pensions Authority report on reforming and simplifying the private pensions arena. Among its proposals are higher standards for trustees of workplace pension schemes, better information for members and a reduction in the number of pension savings vehicles.
Submissions are invited on the proposals from all interested parties by October 3.
The document notes that there are more than 160,000 occupational pension schemes. Ireland has more small and single-member schemes than any other country in Europe.
The report said it was concerned that small schemes had less bargaining power with service providers but large schemes were able to reduce costs. Mr Varadkar said many workers were "paying too much".
In addition, there are more than 180,000 individual and corporate trustees listed in the authority's records. The report says it is unrealistic "to expect a significant level of pension knowledge" in such a large group. It said it was "impractical" for the authority to supervise such a large number of schemes.
Mr Varadkar said 4pc to 5pc of the population are trustees. He said they had a wide variety of abilities and some were not meeting their members' needs. He also said there should be a minimum experience requirement before individuals could take up these roles.
Authority chairperson David Begg said changes to the system were needed so that savers better understood their pensions.