28 Feb 2018 | 03.28 pm
Automatic Pensions Enrolment From 2022
Contributory State Pension rules firmed up
28 Feb 2018 | 03.28 pm
A major reform of future State, private and public service pension provision has been announced by the government.
The two main reform measures relate to the introduction of the Total Contributions Approach to the State pension from 2020, and the implementation of an Automatic Enrolment supplementary retirement savings system for employees without pensions coverage from 2022. “It is intended that employee savings in this Automatic Enrolment scheme will be supported by employer and State contributions,” said minister Regina Doherty (pictured).
Under TCA, a person’s contributory pension will be proportionate to the contributions they make, with fair regard for periods of child rearing, full time caring, and periods in receipt of social protection payments.
With effect from March 2018 (with arrears paid at the start of 2019), people who reached pension age from 1 September 2012 will be offered the option of transferring to a TCA model, and a TCA model will be proposed for all new pensioners from 2020.
It is intended that a TCA design proposal will be published for public consultation in Q2 2018 with the TCA design being finalised in Q4 2018 for enactment in Q1 2019 and to take effect from 2020.
As with the model being offered on a transitional basis to post-2012 pensioners, the model from 2020 is expected to prioritise those who up to now were impacted upon by anomalies in the ‘Yearly Average’ system in place since 1961, and whose home-caring prior to 1994 has not been recognised until now.
For those with very few contributions who are not favoured by the new system, there will remain a non-contributory pension.
Regina Doherty commented: “It is increasingly evident that most Irish workers are not saving enough, or indeed at all, for their retirement years. Many people will be faced with a serious reduction in their living standards when they retire – a fall in income they clearly do not want.
“The government has decided that a new Automatic Enrolment supplementary retirement savings system, where the individual retains the freedom to opt-out, is the best approach to take. When introducing this system, we will ensure that those on low to middle incomes receive financial support from both the government and their employer.”
The government also intends to take measures to improve transparency and confidence in the operational environment for private pensions and improve scheme governance and regulation.
There are two strands to the State pension system. A contributory pension for those people who have a record of paying social insurance contributions and a ‘safety-net’ of a non-contributory or means-tested pension.
The non-contributory pension is available to people who do not have sufficient social insurance contributions to qualify for the contributory pension but who do not have other means of income to sustain them during their retirement years.
Doherty said it is proposed to maintain the value of the State pension (Contributory) payments at a level of 34% of average earnings. Towards this end, it is intended to bring forward proposals to link future increases in state pension payments to changes in the consumer price index and/or average wages.
Doherty also pledged there will be no further increase in State pension age before 2035 (beyond the increase to 67 and 2021 and 68 in 2028 already legislated for) and any future changes in the State pension age after 2035 will be linked to increases in life expectancy.
In order to ensure that changes to pension payments are balanced with changes to how pensions are funded, the Government intends to publish a consultation paper during 2018 on an appropriate approach to funding the social insurance system.