Insurance federation backs opt-out mandatory pensions

The Government should introduce compulsory pensions where workers are automatically enrolled in the scheme but have the right to opt out, according to the Irish Insurance Federation.

There is now an annual retirement savings shortfall of €7.4 billion or €3,800 for every worker, according to new research conducted on behalf of the federation. The industry body said radical pensions reforms were needed to bridge this "pensions gap".

The IIF favours a so-called "soft mandatory" scheme similar to one in New Zealand and which has been proposed in Britain.

The minimum contribution rate should be 15 per cent of gross pay, with 5 per cent to be paid in by the worker, 5 per cent by the employer and a 5 per cent tax credit from the State. Workers should be allowed to increase their contributions to a maximum of 10 per cent and receive a matching tax credit.

"Experience in other countries suggests that automatic enrolment in supplementary pensions schemes - even with the right to opt out - significantly increases pensions coverage," said IIF chief executive Michael Kemp.

Insurance company Hibernian said its research had suggested that opt-out compulsory pensions would solve the problem whereby Irish workers left it too late to start saving for retirement.

Hibernian deputy chief executive Stuart Purdy said: "You can spend years examining the situation in your country and other countries. Ultimately we need action on this."

Minister for Social and Family Affairs Séamus Brennan yesterday said the green paper on pensions was not "a finger-lengthening exercise". The paper, which will be published by March, will draw on two reports by the Pensions Board, the recent National Pensions Forum, views expressed during the partnership talks and other submissions, he said.