In this edition of Irish Building Magazine, the team in CERS looks at the year ahead. There are some major changes in pensions that have already happened, with others expected at a later date.
As we emerge from Covid restrictions and look forward to a bright and busy year ahead,
it’s a good time to consider some of the themes that are likely to shape our working lives
in 2022 and beyond.
While you are considering the likely impact on your business of scarce labour resources, the rising cost of materials and demand for your services, we want to give you a sense of some of the potential future changes to the pension landscape and how they might affect your business.
IORP II - A ONCE IN A GENERATION CHANGE TO PENSIONS
IORP II, is the biggest change to the Irish pensions landscape since the Pensions Act 1990. This EU Directive was transposed to Irish regulations in 2021 and brings far-reaching changes to the operation of pension schemes in Ireland, that will impact many Irish businesses.
IORP II introduces several new and onerous obligations for scheme trustees and sponsoring employers. It introduces the requirement to appoint Key Function Holders to oversee the risk management strategy of each scheme, which will add significant cost to schemes. It also introduces the need for significant new controls and processes to mitigate risks – again adding more cost.
IORP II will have a huge impact on the Irish pensions landscape. Small pension schemes may not be viable with these new costs, and even large schemes may not wish to assume the onerous responsibilities. We are about to see a significant shift towards multi-employer schemes, with a board of professional trustees and Key Function Holders overseeing the operation of a scheme that includes many employers and their workers.
We are fortunate in the construction sector that this multi-employer model has been operated very successfully already for more than 50 years through the Construction Workers’ Pension Scheme (CWPS) and the Construction Executive Retirement Savings (CERS) scheme. For employers that are members of these schemes, they will not suffer the upheaval that will affect other employers in 2022. Of course, these schemes are open for new employers and can quickly and seamlessly integrate your executives and workers into these multi-employer arrangements.
CLARITY REGARDING THE STATE PENSIONS AGE?
Unfortunately, this one is a question rather than a statement. You may remember before the last election that the planned increase in the State pension age over a period of years to age 68 became a hot and very unpopular topic and was shelved by all parties in their drive for votes. Since the current government was formed, a Pensions Commission was established to look at this issue, among other pension related matters.
The current recommendation is to retain the State pension age at 66 until 2028. It would then rise by three months per year so that it will hit 67 in 2031, and by three months every two years thereafter to hit 68 in 2039. Workers could also defer taking their pension until age 70, with the incentive of increasing the pension payable. But we’ve been here before, this is just a recommendation and now needs to go through the legislative process. As it’s so far in the future, there is no immediate benefit for construction businesses. In time though, it would potentially enable employers to retain valued employees who still want to work for a few years longer.
WHAT ABOUT AUTO-ENROLMENT?
Auto-enrolment, which is the compulsory inclusion of all workers over the age of 23 and earning more than €20,000 p.a. into a pension scheme was due to be introduced in 2022 and then Covid derailed these plans. It has since sat on the back burner, with little political appetite to force the legislation along, as employers recover from the impacts of the pandemic.
However it’s unlikely to totally disappear as pension coverage in Ireland’s private sector is too low and needs to increase. It’s a case of “watch this space” over the next few years.
The impact of IORP II is the big pension challenge of 2022 for your business. If you would like to discuss how you can navigate your way through this challenge, please feel free to contact the team in CERS.
CERS offers a transparent and competitive charging structure with no annual or monthly administration, trusteeship, legal or actuarial fees generally applied to Employers. To find out more about the CERS proposition please visit our website (www.cers.ie) or contact us via email (firstname.lastname@example.org), to discuss an arrangement that might suit your own needs.