Plans for auto-enrolment pension will still leave string of other issues, says expert

Auto-enrolment is designed to provide private pension cover for around 800,000 people in companies that do not offer pension schemes.

Social Protection Minister Heather Humphreys has promised to have the new auto-enrolment regime in place early next year.

But Dan Malone of the National Pension Helpline said the new scheme will not necessarily address the multitude of pension problems currently facing the country.

He said the inadequacy of private pension pots held by individuals and what he referred to as the “fragile” nature of the State PRSI pension as core issues that need to be tackled.

“There are a number of complex problems to be solved,” he said.

Ireland, like many European countries, is faced with an ageing population.

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The number of individuals aged 65 and over is set to double by 2050, without a corresponding increase in the number of workers.

Mr Malone said this will put a huge strain on Ireland’s social insurance fund, which is responsible for paying out State pension payments to retirees.

And he said that an analysis of private pensions in Ireland suggests that some 90pc of workers are not on track for a financially comfortable retirement.

“So what you have is a system that is weak on both the State pension side and the private pension side,” he said.

The pensions expert, whose brokerage helps people trace pensions they paid into in the past, said that auto-enrolment will only solve the problem of pension coverage.

This is because it will hugely expand the number of people with a retirement savings plan, but it will not address the issue where people have not got enough funds in their pension to have a comfortable retirement.

“The Government will be able to say that they increased the number of people with private pensions from 68pc to close to 100pc but, in reality, auto-enrolment will do very little, at least at the beginning, in the way of ensuring that people have sufficiently-sized pensions to support a comfortable lifestyle in retirement.”

Mr Malone said that having a private pension is one thing, but having enough money in that private pension is another thing altogether.

Auto-enrolment seeks to improve retirement savings for workers aged 23 to 60 who are currently outside the private pension system.

By automatically enrolling eligible workers into a pension, the Government hopes to increase the number of individuals actively saving for retirement.

The scheme will mandate pension contributions from employees, employers, and the State.

An employee earning €20,000 per annum would likely see a gross pension contribution from all sources equal to around €700 in year one of the scheme.

The mandated percentage contributions are set to gradually increase over a 10-year period.

But this, said Mr Malone, is too little too late.

“An individual under the age of 30 can currently contribute 10 times more money to their private pension annually, through the likes of a PRSA (personal retirement savings account), than they’ll be able to contribute using auto-enrolment for the first three years,” he said.