Ireland’s pension system ranks 13th out of 43 countries in Mercer’s 2021 Global Pension Index, but this masks a poor performance in one key area: sustainability.
Ireland ranks just 25th in terms of sustainability, Mercer noted last week. “Future challenges” are obvious, given the ratio of workers to pensioners is set to fall from 4.5:1 today to just 2.3:1 by 2051.
Mercer points to three key policy areas: a relatively generous State retirement pension that was increased in the recent budget; doing a U-turn on plans to increase the State retirement age from 66 to 68 by 2028; and the continued absence of an automatic enrolment system for workers to improve private pension savings.
Changes in the first two areas would be politically unpopular, but the tardiness in introducing an auto-enrolment system is indefensible.
Firstly, auto-enrolment works: a 2014 OECD report noted New Zealand’s KiwiSaver system raised private pension coverage from less than 10 per cent in 2007 to 55 per cent by 2010.
Secondly, an auto-enrolment system has been promised on multiple occasions over the last two decades. The Government’s Roadmap for Pensions Reform had promised auto-enrolment by 2022, but now says it will be “gradually” introduced over the next decade.
The upheaval caused by Covid-19 meant a delay was inevitable, but until 2031? Almost everyone agrees auto-enrolment is a good idea, so why should it take the guts of two decades for such a system to be implemented?