Pensions ‘need urgent reform’ to avert crisis as population ‘ages rapidly’

Ireland’s pension system needs urgent reform, according to an international study.

A review of the retirement provisions in 37 countries found the system here ranked down the list when it comes to sustainability.

The poor showing in that field is because so few private-­sector workers have a pension.

Only around six in 10 of those employed in the private sector have an occupational or private pension.

The low ranking for the sustainability of the pension system here is also partly because the Irish population is ageing quickly.

The 2019 Melbourne Mercer Global Pension Index said there was an urgent need for the Government to press ahead with its plans for an auto-enrolment system for those with inadequate retirement provision.

However, the introduction of the planned scheme has been beset by delays.

Meanwhile, the compilers of the report referred to data that showed that there are currently five workers for every pensioner in Ireland.

But by 2050 this will fall to just two workers for every pensioner, meaning there will be far fewer workers to fund the State pensions of retired people in future.

This is despite the fact that this country scores highly on what is called pension adequacy.

This is down to the fact that the weekly State pension amount is regarded by the researchers at Mercer Global as relatively generous.

Combining pensions sustainability with pension adequacy meant that Ireland’s system came 11th overall out of the 37 countries reviewed.

The researchers said that when public-sector workers were included, just half of the workforce had an occupational pension.

This means there will be a growing strain on shrinking resources, if the Government does not take steps to redress this imbalance.

The Government has committed to have an auto-enrolment pension system in place from 2022 for these workers.

But no money was allocated in the Budget to set up a key piece of infrastructure to deliver auto-enrolment.

Plans for an auto-enrolment pension scheme have been talked about for 15 years.

Last year, Social Protection Minister Regina Doherty set out a number of deadlines to ensure the new mandatory scheme is in place from 2022.

Caitriona MacGuinness , the head of defined contribution pensions at Mercer in Ireland, said: “Ireland’s relatively high ranking masks an underlying imbalance.

“It’s clear our comparatively generous State pension will come under increased strain as the population continues to age rapidly between now and 2050.”

She added that progress to roll out the auto-enrolment scheme had been limited, and called the 2022 auto-enrolment date “challenging”.

The report said Ireland needed to increase coverage of employees in occupational schemes, and introduce a minimum level of mandatory savings to retirement accounts.

The Government also needed to reduce its debt to help make State benefits more sustainable, it warned.