Guest Comment: Pensions in a time of Covid-19

Irish Association of Pension Funds (IAPF) CEO, Jerry Moriarty, discusses the challenges for the pensions industry in Ireland at a time of a global health and economic crisis

At the beginning of 2020 in Ireland, all the focus was on a general election, which was called on 14 January and took place on 8 February. Pensions became an early area of focus, as the proposed increase to the state pension age from 66 to 67 on 1 January 2021 came under the spotlight.

There was considerable pushback, mainly due to the lack of transition arrangements when many people still expect to retire from work at age 65. Most of the political parties promised to stop the increases or even revert to age 65. The election result was indecisive, and a new government still hasn’t been formed.

Like everywhere else in the world, the arrival of Covid-19 has pushed everything else into the background. When the country practically shut down in March, the impact was sudden and severe.

By the week commencing 11 May, around 589,000 people were receiving the Covid-19 Pandemic Unemployment Payment of €350 per week for those unemployed as a result of the economic shutdown.

A further 456,200 people were receiving income support through the Temporary Wage Subsidy Scheme, for which over 53,000 employers have now registered. 214,700 people were receiving the standard Jobseeker’s Benefit of €203 per week, which was in place before the Covid-19 crisis. This means that in total around 1.3 million people are now fully or partially dependent on the state for income support out of a workforce of 2.3 million; this has naturally pushed long-term pension issues down the priority order.

It is encouraging though that progressing auto-enrolment has been agreed by the two parties most likely to form a new government. In the meantime, schemes and administrators are focused on dealing with the day-to-day impact of Covid-19. The IAPF surveyed our members in April and most schemes reported an increase in member queries, requests for transfer values, retirement quotes and fund switches. Third party administrators have switched to all or most of their employees working from home. That doesn’t seem to have caused too many issues and, interestingly, all schemes that had a business continuity plan in place have said that it was fit for purpose.

While the regulator has identified some of the priorities schemes should deal with, such as paying benefits, none of the statutory duties have been relaxed. The areas that are causing most concern for schemes relate to employer contributions where the employer is struggling with cashflow. The Irish Wage Subsidy Scheme also does not allow for employee contributions to be deducted. The regulator also requires some documentation to be provided to members in paper format and this can be logistically difficult at the moment, with access to printing facilities being an issue.

Defined benefit schemes will be anxiously considering their funding position and the strength of the employer covenant. With legislation to introduce employer debt not having survived the previous parliament, this leaves trustees and members in a vulnerable position.

Hopefully as the country eventually begins to reopen, some of these issues will resolve themselves. In the meantime, there will need to be a pragmatic and practical approach as suggested by the European Insurance and Occupational Pensions Authority (EIOPA), “in order to mitigate the impact on pension schemes and their members and beneficiaries, as well as to avoid pro-cyclical effects on the real economy and financial system, using a risk-based and proportionate approach”

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