Retirement benefits from the Irish social security system (Pay-Related Social Insurance [PRSI]) are flat-rate amounts unrelated to earnings, which provide a very modest benefit (EUR 248.30 per week in 2019) at retirement. Benefits can be supplemented by individual and group retirement plans. While over 90% of large domestic and multinational companies surveyed by Willis Towers Watson provide retirement plans for their employees, the Minister responsible for pensions has confirmed that only around one-third of private-sector workers are covered by an individual or group plan. Since 2003, companies are required to offer employees the option to enrol in Personal Retirement Savings Accounts (PRSAs) if the company doesn’t offer a group retirement plan, but employees are not required to enrol in a PRSA or employer plan. In 2008, total assets in funded private pension plans equalled 33.8% of GDP (OECD data); in 2018, that figure was 33.9%.
The government moved to address the issue by proposing a general auto-enrolment mandate as part of a new workplace retirement savings system, outlined in a five-year pension reform road map in 2018 (see prior news coverage here). Following public consultations, the government has approved the development of legislation to launch the system in 2022, based on a design plan developed by the Department of Employment Affairs and Social Protection, outlined below.
In addition, regulations were recently issued bringing Ireland into compliance with the 2014 EU Pension Mobility Directive. The regulations address vesting and waiting periods for plan members who transfer between EU member states.
Though designs vary, the typical retirement plan offered by multinational employers is a DC arrangement, jointly funded by employee and employer contributions at about 12% of base pay at the median (7% from the employer and 5% from the employee). The impact of the mandate may be modest for many employers that wish to use their existing plan as the auto-enrolment vehicle, especially if the auto-enrolment legislation aligns with the tax framework for group and personal pensions. That said, the to-be-determined prescribed minimum standards could require plan/fund changes in this situation (e.g., fee cap, default fund). Currently fees are lightly regulated and vary widely by type of investment management and strategy. Employers should monitor the development of legislation as further details are released.