Media Articles
The National Pensions Framework and the implications for employers and employees - Part 1
March 2010
HR & Recruitment Ireland
Part 1 - Published 26 March 2010
A major reform of future State, private and public service pension provision was announced by the Taoiseach, Minister for Finance and Minister for Social and Family Affairs on 3rd March 2010.
Background to the Report
The new National Pensions Framework is the result of a comprehensive public consultation process that began with the publication of a Green Paper on Pensions in October 2007. Development of the Framework was also informed by the proposals in the McCarthy Report and the Report of the Commission on Taxation.
Key Elements of the National Pensions Framework
• The State pension will be reformed and will remain as the fundamental basis of the pension system in Ireland. Every effort will be made by the State to keep the value of this pension at 35% of average earnings;
• A new supplementary pension scheme will be introduced in 2014 to provide additional retirement income for employees who are not already in a pension scheme. Employees earning above a certain income threshold will be automatically enrolled in this new scheme, and the State and employer will support this by providing matching contributions;
• There will be matching State and employer contributions. The State contribution will equal 33% tax relief – (delivery mechanism is yet to be decided);
• The same matching State contribution (and delivery mechanism once decided) will apply to existing occupational and personal pension schemes and will replace the current system of tax relief at the standard and higher rates;
• A new pension scheme for new entrants to the public service will take effect from 2010;
• The age at which people qualify for the State Pension will be increased – to 66 years of age in 2014, 67 in 2021 and 68 in 2028;
• A revised and more secure defined benefit (‘DB’) model is proposed which schemes may wish to consider if restructuring in the future.
The View from IFG Corporate Pensions
IFG Corporate Pensions welcomes the release of the National Pensions Framework, bringing much-needed clarity to the future of the Irish pensions industry. While we welcome many of the proposed changes within the framework, it is our view that the Government may have missed an opportunity to identify further innovative solutions to address the significant issues within the industry, during what is a challenging period for both employers and employees.
While it is difficult to be overly enthused by the Government’s proposed plans, we must now focus on the positive elements and ensure that both employers and employees are aware of the direct impact these changes will have on them and their retirement planning options.
The National Retirement Age
The age at which people qualify for the State pension will be increased to 66 years of age in 2014; 67 in 2021; and 68 in 2028, meaning we all have to work longer. While this may not be a popular move, these proposed increases to the State pension age are consistent with similar increases in other countries and are inevitable given improvements in life expectancy and the need to ensure the sustainability of the Irish pension system.
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