Will the government drop pension hot potato? Count on it

Personal Finance columnist Jill Kerby is looking at the issues of pensions once again...

Last week a dear friend of mine had her second a baby. In her mid-40s. By the time this new baby is ready for a third level education, her parents will either be retired or nearly there; fortunately, mam and dad are well paid professionals who (just about) own their own home.

And while their energy levels are going to be stretched, these older parents don’t face the huge financial burden that increasingly typical numbers of couples 10 years younger have to contend with as they start their families: the struggle to even get on the property ladder as well as crèche fees and education costs, let alone an expectation that they will fully own their own homes by the time they retire.

While having babies later in life is becoming more common, women with an adequate, let alone the kind of executive type, pension that my friend has, is not. It is estimated that only about 40pc of private sector workers have a company pension, few of which are not fully funded by both employer and employee. Women, part-time workers and the self-employed are particularly poorly represented and the government’s proposed auto-enrolment pension scheme for the private sector is unlikely to see even a glimmer of the light of day before 2023-2024.

"There is no great cohort of people at the moment jumping up and down behind the auto-enrolment scheme," says Jerry Moriarty the CEO of the IAPF, which represents pension industry professionals. This is hardly a surprise, he says, given the financial devastation racked up by the pandemic.

"Not only is the design and operation of the scheme still not agreed," says Moriarty, but employers who will be obliged to roll out salary contributions over a 10-year period "are not fully on board, especially in the sectors that need it most – retail, hospitality and tourism. "Not even the unions are clamouring" for its introduction.

He conceded that "there is never a good time to bring in a pension scheme" that requires a compulsory salary contribution by employers and a soft mandatory one by the workers. But with the pandemic, the housing shortage and soaring health treatment queues colliding, the government isn’t going to push private pension funding up the ‘must do’ list soon.

Nor do Moriarty’s members, which include the big pension providers, and administrators don’t expect much enthusiasm in government for the introduction of a later state pension retirement age.

The Commission on Pensions was supposed to report to government last month on its findings about whether the proposed state pension age should be 67 and not 66 as it is currently.

That recommendation may be overdue, but as I wrote last week ("two hot financial potatoes that keep being passed on") a majority (83pc) of more than 100 top pension experts surveyed by ITC, Ireland’s largest pension trustee company, said they expect the commission will find in favour of extending the pension age to 67 from next year and to 68, (in 2028 or 2029 as originally planned).

However, only 65pc believe the government will implement the finding.

Moriarty doubts if the new legislation needed to implement reverting to the later intended retirement ages will happen before the next election.

Given the continuing reluctance of government to implement significant pension reform, retirement security is clearly in our own hands.

Younger workers need to…

Join the occupational pension scheme at work. If no scheme exists, start one yourself. Group personal retirement savings accounts (PRSAs) are supposed to be offered by employers (depending on the size of the company), but they are not obliged to make contributions, only to facilitate them. Make it your own auto-enrolment scheme. The impact of time on your money is magic. Be sure to collect the annual tax relief at your highest rate of income tax.

Consider working in the civil and public service where pensions are guaranteed and are more generous than in the private sector.

Older workers, approaching retirement need to…

Get an independent review of your occupational or personal pension fund and your personal finances.

Call the State Pension office in Sligo (071 915 7100; sligo@welfare.ie) about your eligibility for the interim €203 per week Benefit Payment for Over 65s who have just retired, which depends on your PRSI contributions. Then also ask them if you are on track to collect your full state contribution pension, currently from age 66.

If your occupational pension is underfunded, find out about how to top it up and collect the tax relief. Speak to your HR department or pension trustee.

If you are self-employed and have a private pension, hire an experienced, fee-based, impartial financial planner or adviser. See www.sfpi.ie for a certified financial planner in your area.

Letters to jill@jillkerby.ie The TAB Guide to Money Pensions & Tax 2021 is in all good bookstores. See www.tab.ie for ebook edition.