Business Pensions

Friday 14 December 2018

'Over-reliance on generous State pension set to come under serious strain' - global index

Proposals: Minister Regina Doherty is running a public consultation on a new auto-enrolment pension scheme. Photo: Tom Burke
Proposals: Minister Regina Doherty is running a public consultation on a new auto-enrolment pension scheme. Photo: Tom Burke
Charlie Weston

Charlie Weston

Ireland has an over-reliance on its "comparatively generous State pension".

A global study from financial consultants Mercer warned that the pay-related social insurance (PRSI) pension is set to come under strain as the population ages.

There are now five workers for every pensioner, but this is due to drop to two workers for every retiree by 2050, raising questions about how sustainable the system is at the moment.

The international survey by Mercer shows that the pension system in this country achieved high scores for the adequacy of the expected benefits. It also scored well for the standards of governance applied.

However, it only scored a D rating when it comes to sustainability.

This meant the 2018 Melbourne Mercer Global Pension Index ranks Ireland in 12th position out of 34 countries, securing an overall B rating for its expected benefits and standards of governance.

The survey result was heavily affected by the rapid ageing of the population.

Mercer said the problem was compounded by the low level of pension coverage here.

Half of the working population has no occupational pension.

Once the public sector is stripped out, two-thirds of workers have no company pension, and will be relying on the State pension unless there is a change.

Mercer executive Danny Mansergh said it was clear that over-reliance on the country's comparatively generous State pension must be addressed.

"The underlying truth is that Ireland provides a comparatively generous State pension, but also one that is set to come under serious fiscal strain as the population ages rapidly between now and 2050," he said.

"It is clear that over-reliance on Ireland's comparatively generous State pension must be addressed," the report said.

Much-delayed plans by the Government to introduce a new auto-enrolment pension scheme will improve the pensions situation in this country, Mr Mansergh said.

This may eventually provide pension coverage to about 600,000 workers.

The Department for Social Protection, under Minister Regina Doherty, is currently running a public consultation on the pensions proposals.

Irish Independent

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