‘Generous’ State pension will be difficult to maintain, warns report

A LEADING pensions consultancy has warned that the ‘generous’ State pension will be increasingly difficult to maintain as the population ages.

Mercer said this was particularly the case after last week’s Budget confirmed that plans to move the pension age to 67 from January have been put on hold.

Mercer also questioned if a Government deadline to introduce a new auto-enrolment scheme in 2022 will be met.

The warnings came despite Ireland ranking in 14th place out of 39 countries in the latest 2020 Mercer Global Pensions Index. This country achieved a ‘B’ rating.

The index placed Ireland ahead of countries such as Belgium, the UK, France, Spain and Austria.

The Netherlands topped the index again this year despite significant pension reform under way there.

Mercer said Ireland’s relatively high ranking in this year’s index masked an important underlying sustainability issue.

The consultancy said Ireland had a comparatively generous State pension, supporting the adequacy ranking.

This is despite pensioners failing to secure a called-for €5 increase in the payment in last week’s Budget.

However, concerns remained over the low level of occupational pension coverage and the fact that Ireland’s population was ageing rapidly,

Mercer said in a new report. Close to one million employees will have to rely on the State pension alone in their retirement as they are not members of an occupational scheme and are not contributing to a private pension.

Mercer Ireland executive Caitriona MacGuinness said Ireland compared well in a global context, but she warned there were big challenges ahead.

“The State pension continues to be generous in an international context.

“And while this supports

The index placed Ireland ahead of countries such as Belgium, UK, France, Spain and Austria

those currently in retirement, it will be increasingly difficult to maintain this level of support in future as the population continues to age, particularly in light of the confirmation in Budget 2021 that plans to increase the State pension age next year have been put on hold,” added Ms MacGuinness.

The Programme for Government has set a deadline of 2022 to introduce a new auto-enrolment pension system to cater for the thousands of workers who have no private pension provision.

But Ms MacGuinness said there had been no new developments since the programme was agreed earlier in the year.