Speech by Minister Varadkar Sunday Business Post Pensions & Investments Summit

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Thursday 22nd September 2016 – Gibson Hotel Dublin


  • I am delighted to be here for the inaugural Sunday Business Post Pensions & Investments Summit. I’m very impressed by your busy agenda.
  • I want to talk today about the Irish pension system and the need for ongoing reform.


The State Pension

  • Our pension system was set up to provide an adequate and sustainable standard of living, and prevent an unwanted reduction in living standards when people retire. 
  • It works through a combination of direct State support with the State pension and other benefits, and also by encouraging workers to put aside supplementary savings when in employment through generous tax reliefs, and improve their income in retirement.
  • The State pension will continue to be the bedrock of the Irish pension system, which aims to guarantee an appropriate minimum level of income for retirees. 
  • However, you are all aware of the challenges regarding the sustainability of the State pension, as with all western economies.  Each year more people are living to pension age and living longer in retirement.
  • State pensions already account for the single largest block of social welfare expenditure. 
  • In 2016, approximately €7 billion will be spent on pensions, which represents 35% of my Department’s total current expenditure.
  • Currently there are 5.3 people of working age for every pensioner. This ratio is expected to decrease to half this amount by 2040.  As a result of this demographic trend, the number of State pension recipients is rising by around 17,000 every year.  This has significant implications for the future cost of State pension provision, which is currently increasing by close to €1 billion every five years. 
  • Some significant reforms were introduced over the last few years to improve the sustainability of the State pension.  This began in January 2014 by standardising the State pension age for everyone at 66. This will increase to 67 in 2021 and 68 in 2028. 
  • The qualification requirements for the contributory State pension have also been amended to ensure that payment rates more accurately reflect someone’s social insurance history. This means that those who contributed more frequently during their working lives will benefit more in retirement than those who made less frequent contributions.
  • These measures are underpinned by a strong safety net payment in the form of the non-contributory, means-tested, State pension.  This means that anyone not qualifying for the contributory system is protected thanks to a guaranteed minimum income on retirement.


OECD Review

  • In 2014, the OECD published a Review of the Irish Pension System.  This Review endorsed the pension policy reforms that Ireland had brought in to make the State pension system more sustainable. It also made a number of broader recommendations for future reform. 
  • The OECD confirmed that Ireland is one of only two 35 member countries in the organisation which does not have a mandatory or quasi-mandatory earnings-related pension to complement the State pension at basic level.  As a result, Ireland faces a very significant challenge in filling the considerable retirement savings gap and reaching adequate pension replacement rates for many of our citizens. 
  • As a nation we are living longer and healthier lives.  Clearly this is a very welcome development. But it also means that as our average age increases, workers must set aside more for retirement if we want to maintain a similar standard of living to that of our working lives.
  • The OECD’s key recommendation was that Ireland should increase pension coverage through a universal mandatory or quasi-mandatory employment-based pension system.


Current Supplementary Pension Coverage

  • The OECD review confirmed that private pension coverage is uneven and needs to be increased.  Our rate of supplementary pension coverage has actually decreased even further since the reference period of 2009 used in the OECD report.  Latest CSO figures indicate that coverage decreased during the economic downturn from 51% in 2009 to a current rate of 47%.   And when the private sector is viewed in isolation, this figure falls to just 35% of workers.  We also know that many of those with supplementary provision are saving significantly less than they need to meet their retirement income goals.
  • This means that a majority of our citizens will rely largely on the State pension in retirement. Unless the overall pension system is reformed, its long term adequacy and sustainability could be compromised. 
  • That’s why I support the development of a new, universal, workplace retirement saving system for workers without supplementary retirement provision.
  • Last year, the Universal Retirement Savings Group was set up to examine the issue.  

  • This group is chaired by the Department of Social Protection and comprises senior officials from a range of public bodies, along with international representatives with pension reform expertise.  The group included one of today’s guest speakers, Charlotte Clarke from the UK’s Department of Work and Pensions.

    Charlotte heads the UK’s Auto Enrolment Programme and I would like to take this opportunity to acknowledge her contribution and support to our work along with that of other staff from the Department of Work and Pensions who gave so freely of their expertise. 
  • Our primary aim is to develop a system that provides universal coverage, and which also significantly improves the adequacy of retirement provision. 
  • Initial work has concentrated on whether to develop a mandatory scheme for all workers currently without supplementary retirement savings coverage, or a scheme which automatically enrols anyone without supplementary retirement savings coverage, with an optional opt-out.
  • It’s essential that we choose a system which is best suited to Ireland.  All the evidence indicates that introducing a new system will be hugely complex, involving numerous policy, legislative, administrative and technical matters.  It will take a number of years to implement, and will also need to be phased in over time.
  • Detailed consultations have already been held with consumers, employer representatives, trades union, the pensions industry and advocate/interest groups, as well as a range of Irish and international experts in this field.
  • International experience shows clearly that you need a consensus across political, business and civil society for any new universal supplementary pensions system to work.
  • Last July I chaired a meeting on this subject at the National Economic Dialogue. There was widespread support at the meeting about the need to improve retirement provision.
  • Since then we have included the development of a pensions framework in the work programme for the recently established ‘Labour Employer Economic Forum’.

    This initiative, supported by Government, provides a forum for IBEC and ICTU to exchange views on the economy, employment and the workplace.
  • Finally, I believe firmly there is a need to reform and simplify the existing pension landscape in order to successfully deliver any universal system. 
  • This is essential to achieve a more coherent and consistent pension system, and to increase confidence and understanding among pension savers.   
  • That’s why I recently launched an open consultation process on The Pensions Authority’s proposals for reform of       private pensions.  
  • I encourage everyone here today to consider these proposals made and to share their views and insights with the Authority and my Department.  This will help us to develop new policy initiatives and build the foundation for a universal system.
  • 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.



  • The introduction of any new system of universal pension coverage will take many years. The Government will be guided by the initial conclusions of the Universal Retirement Savings Group and the outcome of the Pensions Authority consultation.
  • My strong view is that serious pension reform is only possible with a broad social consensus around the design of a universal system. This represents the most fundamental reform of our pension system in a generation. It’s already a key area for my Department and will remain so for many years ahead.
  • Finally I want to thank you again for the opportunity to speak at this inaugural Sunday Business Post Pensions & Investments Summit.


Last modified:22/09/2016