Learning lessons on pensions from our near neighbours

Britain is moving towards younger enrolment in compulsory workplace pensions without any lower limit in earnings

While Ireland is still stumbling its way to the introduction of a compulsory workplace pensions scheme — auto-enrolment — our neighbours in the United Kingdom, whose example we are following, are expanding who is covered.

The Irish scheme is now scheduled to take effect from the start of next year, but it has been promised before and it remains very likely that it will be delayed again.

Two of the more contentious elements of the Irish auto-enrolment scheme in recent Oireachtas committee sessions were the age at which you would be enrolled and the amount you had to earn. The current plan is to target those aged between 23 and 60 and earning in excess of €20,000.

Auto-enrolment elsewhere

Critics argue the first made no sense and the second disadvantaged women in the workplace among others.


In the UK, Conservative MP Jonathan Gullis introduced a private member’s Bill last week — crucially, supported by the Department of Work and Pensions (DWP) — on plans to expand auto-enrolment in that country. It will allow government there to abandon any lower earnings limit and reduce the age of those enrolled to 18.

If we are learning from the UK experience in this area, it seems sensible to follow this example now from the outset rather than putting ourselves through the decade-long trial that has now brought the British to see the sense of this approach.

Will the protocol deal bring prosperity to Northern Ireland?

Listen | 44:30

In one respect, however, the UK’s scheme is less fit for purpose than what is proposed here — adequacy. A report from the UK’s DWP warns that about one in eight workers runs the risk of undershooting their income retirement targets. There have been calls from the UK Pensions and Lifetime Savings Association to increase contribution levels from the current level of 8 per cent to 12, shared equally between worker and employer.

In Ireland, though we are starting at a relatively notional level of 3.5 per cent of worker’s gross salary — 1.5 per cent from each of worker and employer and 0.5 per cent from the State — that will rise to 7 per cent in year four, 10 per cent in year seven and 14 per cent from year 10.

The figures from the DWP survey also paint a stark picture for higher earners, of whom it says more than half are not setting enough aside in pension savings. That is a reminder even for those in an occupational pension scheme in Ireland that just being in a scheme is not enough, higher earners need to ensure they are contributing enough to meet their post-retirement income targets.