Five years ago Mercer Ireland’s head of defined contribution and private wealth, Caitríona MacGuinness, warned that Ireland’s “comparatively generous State pension would come under increased strain as the population continues to age rapidly between now and 2050”.
This year the failure of the State pension to keep pace with increases in national average earnings was one of the key factors dragging the State down to a 10-year low ranking in a study of pensions schemes covering two-thirds of the world’s population.
Increasing longevity, high interest rates and rising costs of care, which add to pressure on national pension programme budgets were a global trend, with scores in the Mercer CFA Institute Global Pension Index falling across the board. But Ireland still managed to outperform on the downside.
The report, which measures State and private pension coverage, found that Ireland continues to rank middle of the pack in Europe – well behind the Netherlands which tops the overall rankings but also well clear of Italy and Austria in 35th and 40th places respectively.
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And MacGuinness is confident that the long-promised mandatory workplace pension scheme – auto-enrolment – will boost the perceived sustainability of Ireland’s pension income regime.
Of course, Mercer has been betting on auto-enrolment to bolster Ireland’s pension provision for several years now, only to see its introduction continually pushed back. MacGuinness welcomed the recent decision to finally introduce auto-enrolment at the end of September next year.
Possibly a bigger concern for future retirees in Ireland and more broadly is that under the now-dominant defined contribution pension model, the investment decisions that will determine how adequate income is in retirement are being made by individual scheme members, many of who are woefully ill-prepared to make those decisions.
Of course, Mercer and its peers are the companies that were advising employers as they moved away from more secure defined benefit pension schemes which promised workers a set proportion of their earnings in retirement to the current model that is altogether riskier for those workers.
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