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Pension reforms in Ireland: background summary

Characteristics of the Irish pension system

  • The Irish pension system is made up of a combination of state and occupational/voluntary elements.
  • There is no general automatic retirement age in Ireland. The state pension is paid at age 66, and this will rise to 67 in 2021 and to 68 in 2028 for both women and men. Some occupations have set retirement ages, such the police force (age 60) and firefighters. The statutory minimum retirement age in the public sector (for those who have joined since 2004) is 65 (except for the police and firefighters). Judges must retire at 70 or 72, depending on how long they have served. 

State pension system

  • The Irish state pension system has two elements – a contributory scheme and a  non-contributory scheme.
  • The State Pension (Contributory) is paid to people from the age of 66 who have made enough social insurance contributions. It is not means-tested. This pension is taxable but individuals are unlikely to pay tax if it is their only income.
  • The means-tested State Pension (Non-Contributory) is payable to individuals aged over 66 who do not qualify for a State Pension (Contributory) or who only qualify for a reduced contributory pension, based on their insurance record.

Occupational pensions

  • There is no legal obligation on employers to provide occupational pension schemes for employees. However, a growing number of employers are setting up schemes and there is government encouragement to do so. In general, large employers tend to offer occupational schemes, whereas many small employers do not.
  • Occupational pension schemes are generally regulated by the Pensions Authority. Contributions to approved occupational pension schemes may attract tax relief.
  • Occupational pension schemes may be contributory or non-contributory, funded or unfunded, defined benefit or defined contribution.
  • In practice, most occupational schemes are defined contribution – there has been a shift from defined benefit to defined contribution in recent years, and some companies have closed defined benefit schemes to new members.  
  • Public sector pensions are paid out of an unfunded scheme, financed directly by the government, on the basis of defined benefit.

Personal pensions

  • A personal pension scheme (Retirement Annuity Contract, RAC) is an arrangement by a self-employed person or an employee, usually a person who is not a member of an occupational pension scheme, to provide a pension on retirement.
  • RACs are governed by tax legislation and financial services legislation and not regulated by the Pensions Authority. RACs are defined contribution schemes, through personal pension products.
  • Individuals may not contribute to an occupational pension scheme and a personal pension arrangement at the same time in relation to the same employment.

Other pension arrangements

  • From 2003 onwards, Personal Retirement Savings Accounts (PRSAs) became available as an alternative for occupational pension schemes by employers who do not wish to sponsor such schemes. They may also be used to supplement occupational scheme benefits, as Additional Voluntary Contributions (AVCs) and as a substitute for personal pension schemes.
  • Employers must offer access to at least one standard PRSA to any employee who is not eligible to join an occupational pension scheme within 6 months of joining employment and must offer a PRSA for AVC purposes if there is no facility for AVCs within the scheme.

Pension reform in Ireland

  • The Social Welfare and Pensions Act, 2009, increased protection for workers in defined benefit schemes
  • The Social Welfare and Pensions Act 2011 made a number of changes to the qualifying age for State pensions, under which the qualifying age will rise to 67 in 2021 and 68 in 2028.
  • The OECD carried out a review of the Irish pensions system in 2013, noting that the main challenges for the future were affordability, adequacy and coverage.
  • There is currently a debate about auto-enrolment in supplementary pension schemes, under which employers would be obliged to enrol employees in schemes, with employees given the option of opting out. Auto-enrolment in defined contribution plans for young employees above a certain income threshold has been in force since 2014.