European Trade Union Institute, ETUI.

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6 June 2018

Ireland: Roadmap for Pensions Reform leads to considerable changes in the State Contributory Pension

The Irish government has unveiled a ‘roadmap’ outlining a radical reform of pensions over the years 2018-2023. The roadmap proposes a comprehensive reform of the entire pension system, including the state pension, public sector, private sector and those without any pension scheme. Whilst the trade union movement recognises the anomalies and inconsistencies within the current method of assessing entitlement to the contributory pension, they retain serious doubts about the planned reforms.

The government announced a major reform of future State, private and public service pension provisions in February 2018 in its five year ‘Roadmap for Pensions Reform’. The roadmap detailed specific measures presented under six strands that, according to the government, will modernise the country’s pension system while continuing to target resources at those most in need. The report builds on previous pension strategies that have diagnosed the challenges, identifies specific actions and sets out a timetable for implementation.

An important part of the planned action as formulated in the six strands is a reform of the State Contributory Pension (SCP). The current SCP is payable at age 66 (age 67 from 2021, 68 from 2028) to people who have satisfied certain conditions. The idea is to work towards a Total Contributions Approach (TCA) by 2010 that qualifies workers with 40 years’ social insurance contributions for the full pension, with allowances for gaps of up to 20 years for caring duties. The proposal foresees no increases to the qualifying age until at least 2035, other than those provided for in 2012 and 2028. After 2035 any change will be linked to increases in life expectancy.

Another strand announces that a new 'Automatic Enrolment' retirement savings system will be introduced from 2022 to support and encourage personal savings provision. All private sector employees in identified age and income thresholds (e.g. over 23 years of age and earning more than €20,000 annually) who are without existing private pension provision will be automatically enrolled into the system. Others, for example workers on lower salaries, self-employed workers and those with existing private pension provision, will have the opportunity to opt-in to the system. Contributions will be made by workers and employers, with the State topping these up.

In recent months, the trade unions have expressed serious doubts and concerns. The Irish Congress of Trade Unions outlined the views of Congress on the proposed reform, ahead of a Department of Employment Affairs and Social Protection seminar. The ICTU said that it had three basic reservations related to the method for calculating entitlement to the Contributory State Pension and the proposed TCA-model, i.e. the qualifying years, the implementation date and the pension age. According to the ICTU, the country is currently on course to have the highest pension age in the OECD in 2028, even though it has the second lowest pensioner to worker dependency ratio in the EU27.

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