Description:The change of the State pension age from 65 to 66 came into effect on 1 January 2014. The “State pension (transition)” is no longer available to those who turn 65 and they must wait until their 66th birthday to receive the State pension.
Most organisations have a pension age of 65 and Ibec research found half of those surveyed do not anticipate changing this in 2014, though a quarter may consider requests from retiring employees to work beyond their 65th birthday.
Changes under the Social Welfare and Pensions Act 2013 give trustees of defined benefit (DB) schemes the power to change the rules so that the scheme is not obliged to reimburse a pensioner to make up for the loss of the State pension.
Implication(s):Ongoing changes in government pension policy have made the cost of pension provision more onerous. The unacceptable stamp duty levy on pension fund assets will increase in 2014 and continue at a lower rare of 0.15% for 2015, with no commitment to eliminate it thereafter.
We need to move from the current minimum funding standard for DB schemes to an ongoing funding model, which recognises the long-term nature of pension provision. The modest change in the priority order for insolvent DB schemes in December 2013 gives greater recognition of the entitlements of deferred and current members.
The Government's aim to limit the value of a tax relieved pension to €60,000 pa. led to a further reduction in the standard fund threshold from 1 January 2014.
Current Position:A major shift in pensions policy is needed. In response to the 2013 OECD report on the Irish pension system commissioned by the Department of Social Protection, Ibec believes that now is not the right time to introduce a compulsory pension scheme. While there is a real problem with pension cover in Ireland, our economic recovery is too fragile and any move to introduce such a scheme would have an immediate negative impact on jobs, consumer confidence and economic recovery. The pensions agenda remains fraught and Ibec will continue to lobby for changes throughout 2014
Ibec research on pension schemes in 2013 found that over 90% of members surveyed had a pension scheme in place. Nearly three quarters, 73% had a defined contribution (DC) scheme, 21% operated a defined benefit (DB) scheme, and 11% said they operated both. The figures show the growth in DC schemes in recent years, and we expect to see greater attention on the compliance and management of DC schemes, to better meet both employer and employee needs.
In terms of contribution levels, employer contributions to DC schemes were lower than for DB schemes. In 2013 the median employer contribution to DC schemes was 5% to 7% but was much higher at 15% for DB schemes. The median employee contribution was 5% in both cases.
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