The government published the Pensions Roadmap, another document outlining the government’s plans to address a number of pension issues that have tackled. This is another document that can be added to a number of pension papers that have been written and left sitting on a shelf. I have summarised some of the main points addressed in the paper below.
Comment – It is good to see that the PRSI average system is being replaced. It was disadvantageous to those who took time out to raise a family or take care of an elderly parent as well as those who had summer jobs. The government have failed to address the elephant in the room, how is this going to be paid for? They have acknowledged that there will not be enough working people to pay for all the benefits but completely ignore how we will continue to provide this expensive benefit.
Comment – While I welcome auto enrollment, I think this can be improved. Why wait for someone to reach a particular age? The public service has 100% pension coverage for all employees. We should be looking at reaching that level of coverage for private sector workers too. The proposal also looks at standardising the tax relief on contributions to 30%. This will discourage those being taxed at 40% and you will find that it will not particularly incentivise those on the lower tax bracket to contribute more. Having it payable at the same time as the State pension is inconsistent with all other pension plans which have much more flexibility. A lot of people don’t want to have to work to age 68. If all of their post retirement income isn’t paid until that age, they won’t have a choice.
Comment – We are all for ensuring that pensions are run in a compliant manner but I am not sure if this is a problem that needs to be addressed? Pension schemes are by and large run in a prudent and efficient manner. The Pensions Authority are certainly looking for more power but how much will this cost? Pension scheme members pay Pensions Authority fee of €9.50 a year. With all the extra powers that they are looking for, this fee will increase. They will also be looking for master trusts to run smaller company schemes, again, something that has to be paid for. I am sceptical as to whether the government will reduce pension costs. The market is doing a pretty good job of doing that themselves and the government introduced standard PRSA is one of the most expensive contracts in the market.
Overall, I welcome the auto enrollment scheme as private sector workers need to start providing for their own retirement. Reducing the tax relief on pension contributions to 30% will annoy a lot of people and make pensions less attractive. So will dictating the retirement age of the plan, especially if it is 68 for most people. As an official government document, it is very vague and lacking definitive figures and strategies. A lot will be changed or left on the shelf…along with the other ones.
If you have any questions, send me an email to steven@bluewaterfp.ie