Insurance Ireland recently published a report entitled "A Universal Pension Fund for Ireland" which explores options for the implementation of a universal pension scheme designed to increase pension coverage in Ireland. It profiles comparable pension schemes in the UK (NEST), Australia (MySuper) and New Zealand (KiwiSaver) and outlines a road map for an Irish universal pension scheme – known as MySaver. We examine the key proposals contained in the Report.
The four key elements considered in the Insurance Ireland report (the "Report") are as follows:
1. Product design
Insurance Ireland states the aim of MySaver is to reduce complexity in the pension system. This will be done by delivering an automated and portable defined contribution pension that is high-volume, low-cost and targets low-to-medium earners.
Insurance Ireland assumes the auto-enrolment model will be adopted by policymakers for a new pension scheme. However, the Report states that any existing defined benefit and defined contribution schemes should be preserved if they provide benefits that are at the very least comparable with those provided by MySaver.
2. Determining appropriate retirement income
Insurance Ireland proposes a four-fold approach to retirement income for MySaver, with decumulation built into the design.
- Foundation - guaranteed basic level of income for individuals through the state pension.
- Basic - tax-free lump sum for immediate expenses such as paying off a mortgage.
- Supplementary - regular income that supplements the state benefit (Annuity).
- Discretionary - long-term fund to meet additional need expenses.
3. Investment policies
Insurance Ireland suggests MySaver investments should be designed to deliver reasonable returns, protect accumulated funds and be capable of achieving individual retirement aims. The Report also flags the necessity of financial advice, guidance and information to encourage more active participation.
4. Administration of MySaver
Insurance Ireland proposes using existing industry infrastructure for the administration of MySaver and for its enhancement. Insurance Ireland proposes to do this by using a new MySaver Hub to bring together some aspects of administration for the purposes of efficiency, cost and control.
The Report certainly raises some interesting concepts, but a lot of what will happen in the future depends on the specific details of any universal pension scheme adopted in Ireland. Speaking at a Pensions Authority event in September, the Minister for Social Protection, Leo Varadkar, indicated that his department will be focusing on this issue in 2017.