INDUSTRY REACTION:THERE WAS mixed reaction to the Government's new framework for future pension provision from business and the pensions industry last night. The proposal to raise the age of retirement over time to 68 was broadly welcomed, although some commentators pointed to the need for a parallel move in defined benefit and public sector schemes.
Measures to extend access to Approved Retirement Funds to members of all defined contribution schemes were also cheered.
The reduction in tax relief was less welcome, with Mercer among others pointing out that it effectively exposed higher earners to “double taxation when they take their pension benefits”.
“This step is inconsistent with the overall aim of encouraging saving for retirement,” said senior retirement consultant Michael Madden. If relief was to be limited to 33 per cent, it said, the same rate should apply at drawdown.
Deloitte Pensions managing director Ian Mitchell also expressed concern that autoenrolment could lead some employers to cut back on better pension provision currently on offer. However, he described the overall framework as “a welcome contribution to one of the most important long-term issues faced by the State”.
The Society of Actuaries said the implementation of the recommendations in the report “will greatly enhance the support of pension provision into the future”.
The pensions sector was less enthused. Ray McKenna, managing director of Towers Watson, said the measures were “a very considerable threat to the financial security in retirement in future generations” and would fail to address Ireland’s potential pensions timebomb.
Fionán O’Sullivan, director of IFG Corporate Pensions, said the Government had “done little but reduce incentives to provide for retirement”.
Aidan McLoughlin, a director at Independent Trustee Company and chairman of the Irish Brokers’ Association pension committee, said the document had erred in focusing on coverage when the main problem in the sector was adequacy. People needed to be encouraged to save more.
Among the business lobby, the Small Firms Association expressed trenchant opposition to any mandatory pension, calling it premature, unworkable and increasing cost pressure on small employers. “The SFA is fundamentally opposed to the concept of mandatory pensions,” she said.
Ibec director Brendan McGinty said auto-enrolment would fuel wage demands, he welcomed proposals to ease pressure on troubled defined benefit schemes.
Irish Life (Retail) chief executive Gerry Hassett was encouraged that the framework “covers the full spectrum of issues and contains some interesting proposals” but feared that they veered towards a “big government” solution rather than a “competitive market-based” one.
