The Government’s plan to introduce mandatory private pensions for all workers above a certain income limit by 2022 is now in danger of being stalled, putting at risk the adequacy of worker’s future pension pots.
With private pensions still inadequate – research from the Economic and Social Research Institute last week found that women are retiring with significantly smaller pension pots then men – Irish Life, in its pre-budget statement, says the introduction of auto-enrolment needs to be "expedited".
Currently on the agenda for 2022, the auto-enrolment scheme will follow the example of countries such as Australia and the UK, automatically enrolling employees into pension schemes, which will receive contributions from employees, as well as both employers and the Government. However, its introduction in the Republic has been subject to delays.
"The whole plan is now at risk of being stalled and the target date of 2022 missed. Now is the time to act. The reform programme needs impetus and momentum. The Minister should use Budget 2020 to get the plan back on track if the Government is to reach its 2022 target," said David Harney, Irish Life chief executive.
Community rating
Also on the agenda for Irish Life is a change to the levy on private health insurance premiums. The levy, which has increased by 275 per cent in eight years, supports the principle of community rating where everyone pays the same price for the same product meaning the cost of insuring older and sicker people is spread across the market.
However, Jim Dowdall, chief executive of Irish Life Health, said the application of the levy is currently unfair, as two flat rates are applied (to non-advanced and advanced plans) regardless of the premium paid on those plans.
“The flat-rate model artificially increases the premium on lower-level plans. This has led to more customers cancelling their plans. It is a socially regressive tax, which is inconsistent with similar levies on other forms of insurance,” he said, calling on the Government to change the levy to a per cent of the premium to make it more affordable.
Investments
Irish Life also wants to see the alignment of the exit tax on life assurance policies – currently 41 per cent – with capital gains tax (CGT) and Dirt on savings. By 2020 Dirt will fall to 33 per cent, in line with CGT, leaving exit tax much higher.
According to Mr Harney: “This places an unequal burden on life insurance policy savers. Exit tax has a significant impact on the returns earned by savers.”
Irish Life also wants to see the removal of the 1 per cent insurance levy on life assurance payments. Introduced as an austerity measure in the Finance Act 2009, the life assurer says it “acts as a clear disincentive to saving, when low or negative interest rates make other savings options such as bank deposits, unattractive.”
