Just 10% of Irish pension plan sponsors rank ‘best practice’ as priority

Workers in Ireland don't share the views of their employers or plan sponsors on the priorities for their pension plans or the likelihood of them delivering an adequate pension.

State Street's 2019 Global Retirement Reality Report surveyed 195 plan sponsors who operate pension schemes for 1.5 million people in Ireland, Australia, Britain, the US and the Netherlands. Thirty Irish plan sponsors took part.

The report compares the responses of plan sponsors with those taken last year from pension scheme members in all five states to see how closely their views are aligned.

Critically, the report shows that while employers expect more than a third of their staff will be able to afford their current lifestyle in retirement, only 16 per cent of pension scheme members do.

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The perception of employers is not quite as bullish as companies in the US, Australia and the UK, and noticeably less optimistic than their Dutch counterparts.

While plan sponsors in the US, Netherlands and Australia consider their top priority with pension plans is to “do the right thing” for members, in the UK, and more particularly Ireland, using the plan as a key element of recruitment and retention policy for staff was the main consideration.

Where almost two-thirds of US employers said they focused on doing the right thing for their staff in pension plan terms, fewer than a quarter of Irish plan sponsors saw this as the top priority.

More than half prioritised recruitment and retention compared to an average across all five countries of 9 per cent and just 5 per cent in the US.

The Irish also ranked lowest in prioritising having a plan that was aligned with “best practice”. Just 10 per cent of Irish plan sponsors ranked this as priority, roughly half the rate elsewhere.

Hassle factor

When it comes to pension plans, Irish employers are looking to minimise the hassle factor. In weighing up which pension fund provider to choose, the priority is a plan that is easy for the employer to implement and monitor (47 per cent). Making sure the plan is easy for employees to use and understand ranks far lower in the pecking order (just 13 per cent).

And although plans charges can significantly impact performance and the retirement pot available to workers at the end of the day, it was a priority for only one in 10 employers.

Some 30 per of employers feel the onus for making sure employees have adequate income in retirement rests with the plan sponsor, while an identical number consider it the responsibility of the worker.

That is out of kilter with the data from the US, the UK and Australia, where, by strong majorities, the employer view is that retirement provision is down to the employee.

Ironically perhaps, in all five jurisdictions workers are more likely than employers to consider it their responsibility. In Ireland, for instance, 74 per cent of pension scheme members think adequacy is their job, with just 5 per cent expecting employers to ensure provision is made.

By a wide margin – 27 per cent compared to an overall average of 12 per cent – Irish bosses are more likely to consider adequate retirement income for workers to be the responsibility of the government.

Options

In terms of the options offered to workers, 100 per cent of plan sponsors in Ireland consider it important to incorporate environmental, social and corporate governance considerations in the pension plan investments. That is well ahead of the other countries – where such considerations are considered important by between 56 and 73 per cent.

It is also out of kilter with the priorities of their members. Just 41 per cent of Irish pension scheme members feel having such options is important.

Irish plan sponsors believe most strongly among those in the five countries that their members value the ability to transfer funds from one pension plan to another as they change jobs or employers.

This perhaps reflects the changing nature of the Irish workforce, and the belief that a growing number of workers will have multiple employers and roles over the course of their working life.