Speech by Minister for Social Protection Leo Varadkar at the Pensions Authority Pensions Reform Consultation Forum

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15 September 2016

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Speech by Minister for Social Protection Leo Varadkar at the Pensions Authority Pensions Reform Consultation Forum

Introductory Remarks

I’m delighted to speak to you all on the hugely important topic of pension reform. It’s appropriate that the Pensions Authority is hosting this event. The Authority, as you know, plays a crucial role in maintaining confidence in the Irish pension sector. It does this by overseeing compliance with the Pensions Act, and providing a solid base to meet future challenges.

For most people pensions are hard to understand and for younger people they are easy to put off to another day. For many, that day never comes, and they end up without the retirement and income they expected. That’s why pension reform and simplification is so important. We need to change the system so that people can plan for their retirement, and do so in greater numbers. We need to fix the weaknesses so that pension savers better understand their pensions and the decisions they need to make to get good value.

Public consultation process for the Authority’s pension reform proposals

In July the Authority launched a consultation process on pension reform.

The consultation document sets out proposals to reform and simplify supplementary private pensions in Ireland. It is intended that these will help to create better outcomes for pension holders, by improving efficiencies and providing increased sustainability.

As you know, this forum is designed to allow anyone interested in the future of pensions to ask some searching questions about these reforms before sending in their submission.

Here today we have social partners, industry experts, trustees, registered administrators, providers, employers, advisors and others interested in pension reform. I know you will agree that your role is to protect the interests of those who put their trust in pensions to provide an income in retirement, and to encourage those who have yet to make that commitment.

Hopefully this forum will increase your understanding of the proposed reforms and make it easier to make a good submission.

You are all aware of concerns about the efficiency of defined contribution pensions. A fit-for-purpose pension scheme is one that is well-managed, cost-efficient, and easy to understand.

However, with over 160,000 occupational pension schemes, Ireland has more small and single member schemes than any other European country.

This raises real concerns about economies of scale, with small and single member schemes potentially paying excessive charges. The number of schemes needs to be rationalised.

There are over 180,000 individual and corporate trustees listen in the Authority’s records. Trustees are responsible for about €100 billion of pension assets, but the current structure does not reliably meet the needs of its members.

There is a huge spectrum of abilities and expertise among these trustees. However, it is possible to address the issue of professionalism by raising the requirements needed to be a trustee, such as training and minimum experience.

The recently completed review of the EU IORP Directive will impose new and enhanced obligations on schemes. It will be transposed into Irish law and will create extra supervisory obligations for the Authority. This will require some reforms, as many obligations under IORP 2, such as increased prudential supervision, are not met under existing processes.

The authorisation process for pension schemes also needs to be reformed. Currently the only criterion for a scheme to register with the Authority is that it be approved by the Revenue Commissioners. Schemes do not have to be registered until 12 months after commencement. I think a more robust process for authorising schemes is necessary.

There are also too many pension savings vehicles, which makes it difficult for people to choose between them. Reducing the range of pension vehicles by ending ‘Retirement Annuity Contracts’ and ‘Buy-out Bonds’ could ameliorate this.

There are also proposals to simplify the process of transferring from one pension vehicle to another by allowing transfers from Buy-out Bonds to PRSAs, and from Retirement Annuity Contracts to occupational schemes. A simpler pension choice would be easier for consumers to navigate.

As a Government, we recognise the need to tackle long-term challenges in Irish society. Public consultation is an important way to get broad consensus on pension reform. And we hope this consultation process will be completed by the end of the year.

I want to encourage all stakeholders here today to make a submission on the Authority’s proposals, and to take part in today’s question and answer forum. This is a great opportunity for stakeholders to help to shape the future of Irish pensions.

Any reforms will be based on solid evidence, world class advice, and will be informed by the experiences of other countries.

Universal Supplementary Pensions

Before I finish, I want to say a few words about universal supplementary pensions, which I hope will be a key future reform.

A majority of our citizens will rely solely on the State pension in retirement. For some, it will be enough to maintain their standard of living into old age. But for many, it will not. That’s why I view the development of a universal retirement saving system for people without supplementary pensions as an essential objective. There are good models we can learn from in New Zealand, Australia and Singapore, to give just a few examples.

That’s why I support the development of a new, universal, workplace retirement saving system. This will require a substantial multi-year programme of work and will have to be agreed, legislated for and phased in.

Work is ongoing on the potential model. Some countries achieve this by automatically enrolling workers, but also allowing them to opt out.

In other countries, membership is compulsory. This is an enormous project but now that incomes are rising again and income taxes are falling, there is no better time to get it started.

Universal pension provision will have to begin with major reforms in the pension landscape as it is. We need much more coherence and consistency, in order to increase confidence and understanding on the part of contributors. Confidence and trust has been seriously damaged in recent times. I believe the Authority’s reform proposals will help to rebuild public trust and provide a solid basis for a new supplementary pension scheme.

And I think it’s very important when we do talk about a new universal retirement pension scheme that we always make a point that it is designed to be supplementary to a State pension, and not designed to replace it.


I know I don’t need to explain why reform is urgently needed. All of you here today are dealing with the issues on a daily basis. I urge everyone here to engage with the consultation process.

These reform proposals should be given serious thought. If implemented, they can achieve significant improvements in how private pensions are managed and overseen. An objective we all share.


Last modified:15/09/2016