Expert warns against reducing state pension

Any change to the State pension would have a significant impact on the pension plans of people with private pensions, as well as those reliant solely on the State pension in their retirement, attendees at a conference were told this morning.

Patrick Burke, managing director of Irish Life Investment Managers (ILIM), said that the State pension played a key part in the financial arrangements underpinning private sector pension plans and any change to entitlements in the State scheme would impact on expected income levels for those who have invested in private schemes as well as for those dependent on the State pension

In relation to the increase in defined contribution schemes, which are increasingly replacing defined benefit (DB) schemes, Mr Burke said that historic DB led administration and communication methods will “not be fit for purpose”, arguing that DC administration infrastructure should be flexible enough to recognise the individual nature of each employee’s journey to retirement.

The conference also addressed the issue of the cap on available tax relief introduced in last week’s Budget.

David Harney, managing director of Irish Life Corporate Business, said that the cap would lead to a growth of employer backed long term savings plans for employees.

“Once they hit the new cap on tax relief for pensions, employers may find their higher paid employees requesting their pension contributions be added to their take home salaries. However we would argue that a better approach will be to support long term savings plans for employees which will avoid an artificial salary inflation which would be seen if pension contributions were simply added to current take home pay.”