Spotlight on pensions

of the vast swathe of the Irish workforce which currently has no occupational pension provision. According to government figures, there are around 750,000 workers over the age of 23 and earning at least €20,000 per annum currently in that position.

At present, many of them face the prospect of their sole income in retirement being the contributory State pension of around €13,780 per annum at the current maximum rate.

AE will therefore represent a major step forward. But it will not necessarily provide a solution for everyone and in many cases will offer benefits that are actually very different and may not suit those already enjoyed by members of workplace pension schemes.

Addressing adequacy

The first matter to be considered is the question of adequacy. Contribution levels to the AE scheme will start at an extremely low level and won’t reach the same levels as those of many workplace schemes for several years. This means that the real benefits of AE may not be seen for many years.

Niall Fitzgerald, Head of Retirement Solutions, Zurich

The advent of the Auto Enrolment (AE) Retirement Savings System is one of the most significant and welcome developments in the pensions landscape for very many years, writes Niall Fitzgerald, Head of Retirement Solutions, Zurich.

Regardless of what else Automatic Enrolment (AE) achieves when it eventually becomes a reality, it has already succeeded in shining a spotlight on the pensions issue and has generated unseen levels of interest in the topic.

We have seen evidence of that in the increased number of enquiries being received from employers wishing to set up a pension arrangement for their employees or to make improvements to their existing arrangements. In recruitment, employers are also reporting a heightened focus on retirement benefits as well as an impressive level of technical knowledge in relation to pensions among candidates. The AE scheme is aimed at addressing the needs

“The average contribution rates for schemes which are part of the Zurich Master Trust are 5% for both the employer and the employee.”

Contributions start at 1.5% for the employer, 1.5% for the employee and a government top-up of 0.5% in year one. That increases to 3%, 3%, and 1%, respectively, in year four; rises to 4.5%, 4.5%, and 1.5% in year seven and reaches the maximum level of 6%, 6%, and 2% in year 10.

On the other hand, the average contribution rates for schemes which are part of the Zurich Master Trust are 5% for both the employer and the employee, with many of the schemes having significantly higher levels of total contributions, which means improved pension adequacy for these members when they come to retirement.

Companies which offer a defined contribution pension scheme with contribution levels designed to deliver an adequate pension in retirement will enjoy a distinct advantage in the talent market while also enjoying an enhanced employer brand. And they can achieve that with the Zurich Master Trust which offers market-leading active investment performance, great investment fund choice and governance expertise – all in a highly cost effective package.

For more information, call 01 209 2299 or visit zurichcorporate.ie. Zurich Life Assurance plc is regulated by the Central Bank of Ireland.