4/3/2010
By Sophie Baker
The Irish government has announced its overview of the National Pensions Framework, which will see the state pension age rise to 68 by 2028.
The Framework focuses on five areas of Irish pensions: social welfare pensions; auto-enrolment; current occupational and voluntary provision; public service pensions; and tracing service dormant benefits.
For social welfare pensions, the Government will seek to maintain the rate at 35 per cent of average weekly earnings. Homemakers' disregard will be replaced from 2012 with credits for new pensioners, and arrangements will be put in place that will allow people to postpone the receipt of the State Pension, and to make up contribution shortfalls. The state pension age is also set to increase, to 66 in 2014, 67 in 2021, and 68 in 2028.
Auto-enrolment will increase coverage and employer responsibility, the Framework says. Matching employer contributions and matching State contributions will come into play, with the State contribution equalling 33 per cent tax relief. Employees will be permitted to opt-out, and access to Approved Retirement Funds will be provided.
For current occupational and voluntary provision, a matching State contribution equal to 33 per cent tax relief will exist, as well as access to Approved Retirement Funds for defined contribution members. Stronger regulation will come into play, and a new defined benefit model has been proposed. Finally, the funding standard will be kept under review.
A single new pension scheme will be introduced for all new entrants from 2010 to cover public service pensions.
Finally, a tracing service is to be put in place to allow tracing of pension rights by former employees and scheme trustees, and consideration will be given to the establishment of a State managed fund into which untraceable accounts will be deposited.
The Society of Actuaries in Ireland has largely welcomed the Framework, and said these recommendations will greatly enhance the support of pension provision into the future.
Jerry Moriarty, Director of Policy at the Irish Association of Pension Funds (IAPF), said: "We very much welcome the publication of the Framework and at least it brings greater certainty. We would particularly welcome the decision to extend access to Approved Retirement Funds to all DC members from next year which we have called for many years and the intention to set up a tracing service for deferred members is very practical and addresses a growing issue for occupational schemes.
"We have concerns about the implications of the proposals and particularly how they will interact with occupational schemes. Reducing the tax relief for higher rate taxpayers will result in an effective pay cut for many existing members, particularly if it is intended to continue to tax pensions in payment at marginal tax rates. While the soft-mandatory scheme addresses coverage it does not necessarily address adequacy and there needs to be a real understanding of what that will deliver to participants.
"Generally there is a lot of detail left to the implementation period and it is important that there is recognition that the level of expertise required in this area is very high."
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