Minister for Social Protection Heather Humphreys hailed a historic milestone as she announced on Monday that the Government had approved the draft heads of a Bill to introduce mandatory workplace pensions.
Historic is right. Ireland is the only member state of the OECD not to have a system of auto-enrolment designed to ensure workers have adequate provision for income in retirement. Its introduction has been government policy since 2007 when the late Seamus Brennan was the portfolio minister. Seven ministers have passed the buck over the proposal since then across six governments.
Every party of government in the State has been involved in those decisions. And given Sinn Féin’s statist approach to pensions, it seems unlikely it would have been any more proactive on the issue had it been in power
Corridors of power
At least Humphreys had the awareness to admit her proposal comes after decades of talking about auto-enrolment in the corridors of power.
In search of simplicity, the Government plans now to introduce a system that will create two parallel workplace pension paths. That will raise concerns that it plans to phase back the more generous tax relief available on existing occupational pension scheme contributions even as it looks to encourage employees to lock away more of their wages for a long-term retirement benefit.
Given the need to find ways of funding the shortfall in the State pension fund following the political decision to keep the State pension age at 66, such relief must be an attractive target.
System’s sustainability
A new worldwide survey of pensions systems by benefits consultants Mercer again raises the alarm over the sustainability of the Irish pension system in light of that decision on the State pension. Auto-enrolment will help, Mercer finds, but the State still needs to convince that its old-age pension plan is credible financially.
It remains to be seen what happens there. Auto-enrolment, similarly, is not a done deal. With the next general election looming in February 2025 at the latest, and politicians fearful that tinkering with workers’ take-home pay will cost them votes, it would be a brave observer who bets against another political long-fingering on the issue.
If the Government does finally grasp the pensions bullet and takes auto-enrolment live in 2024, it could well be an indicator of how seriously concerned it is about funding its various pension promises.
