The Irish Prime Minister, Mr Leo Varadkar recently announced that the Irish Government will "publish a five year road map for pensions reform before the end of the year". The centrepiece of this roadmap will be a new auto-enrolment system of pension provision for private sector workers. Mr Varadkar went on to say that "I anticipate the first payments being made into those new individually held funds by 2021".
Those involved in the pensions industry are very familiar with road maps. Over the past decade, various road maps have been produced by the Irish Government, representative bodies and think tanks such as the Organisation for Economic Cooperation and Development (OECD) and the Economic and Social Research Institute (ESRI).
In 2015, the then Deputy Prime Minister and Minister for Social Protection "confirmed Government's approval to proceed with work to develop a roadmap and timeline for the introduction of a new supplementary workplace retirement saving scheme". It now appears that this roadmap will be with us before the end of 2017. However, it seems to be taking a considerable amount of time to solve a problem which, if not addressed, will place a considerable financial burden on future generations.
The current economic upturn provides the ideal environment to put in place a mechanism to solve the problem of low pensions coverage in this country.
A good roadmap is, of course, an essential prerequisite for a successful journey but the window for defusing the "pensions time-bomb" is closing quickly. Unfortunately, it will slam shut should the economy hit a bump in the road. This begs the question: should the roadmap be ditched altogether in favour of a GPS?
The significance of four words mentioned in Mr Varadkar's statement will not have escaped the attention of pensions industry participants, namely "new individually held funds". These words may help to give a flavour of the auto-enrolment system that will be introduced in 2021.
The word "new" suggests that the auto-enrolment apparatus will differ from existing pensions products such as PRSAs or trust based retirement annuity contracts. It also signals that it may be based on a new retirement product or system. The existing range of retirement products has been considered by many to be capable of modification to meet the needs of an auto-enrolment system. The wording of the Prime Minister's statement suggests also that this option has not been pursued and we...