The case for mandatory pension schemes

In a recent survey conducted by theĀ IAPF and iReach, it emerged that only half of those working are participating in a pension scheme. While older survey respondents showed a much stronger awareness about pensions, a huge 80% of those under 35 did not know how much (or how little) one receives from the State pension. While this is not altogether surprising, at what point does the awareness around pensions kick in, and at that point is it too late to start a realistic provision for retirement? Is it time to introduce a mandatory pension plan?


The Government has come up with a name for a new mandatory occupational pension but has not given any date for its implementation. The new MySaver scheme is designed for those without any pension in place other than the state pension, Minister for Social Protection Joan Burton said.

The Small Firms Association has signalled its opposition to the idea of a mandatory pension scheme for Irish workers.

In its submission to the Universal Retirement Savings Group, which is examining the issue on behalf of the Department of Social Protection, the SFA says mandatory pension provision will prove costly to employees, to business and the state, without any associated benefits in the long term.

Patricia Callan, director of the Small Firms Association, says the fundamental reason the SFA is opposed to the idea is that not enough work has been done to promote the voluntary approach to pension provision. Ms Callan says the SFA is also very concerned about any increase in the cost of employment, particularly at this time when small businesses are just about getting back on their feet. She says that many SMEs are not even engaged in the concept of pay increases as yet. A mandatory pension scheme would be an extra cost for SMEs because in any such scheme there is always an employer’s contribution as well as an employee’s contribution – which by and large comes back on an employer in the form of a pay claim – and an Exchequer contribution, which is funded by both employees and employers.

Ms Callan also says that a call for a mandatory pension scheme is an “over-reaction” as Ireland has a much younger population that the rest of the EU, which is following this mandatory trend and the economy has a lot of other measures which could be implemented to solve the pension crisis. She adds, however, that the Association does accept that a crisis does exist in the pension system.

The SFA director says that if there was more of a focus on getting people into work, on creating a better and more dynamic economy, then a pension crisis will not arise as the country will be able to fund a pension scheme better. “In particular, in terms of trying to persuade people that private pensions are the best way to go, we need better products, less charges and a much more guaranteed sense of return,” Ms Callan says.


Posted in Pensions.