Scheme shift ‘puts pension responsibility on workers’

THE responsibility of securing an adequate income in retirement is increasingly moving to Irish workers as employers shift away from defined benefit pension schemes.

That is according to the Irish Association of Pension Funds, which held its annual conference in Dublin yesterday.

These defined benefit schemes have been traditionally favoured by Irish employers and are seen as more reliable than what many employers now favour, the defined contribution scheme.

A survey on behalf of the association by the UCD Michael Smurfit School of Business found the number of firms offering only a defined benefit scheme has fallen from 67% in 2002 to 37%, It found that 39% of firms which provide defined benefit schemes have closed their schemes to new members, up from 12% five years ago.

Association chairman Patrick Burke said the number of firms offering defined contribution-only schemes had tripled from 8% to 24%. He said about 50% of pension holders in the private sector are members of defined contribution schemes.

“This growth will place pressure on the Government from the social partners and public to provide the flexible pension benefits to all employees that are enjoyed by self employed, proprietary directors and PRSA holders.”

He said the report found a concern amongst many firms providing pensions that employees were not taking sufficient interest in their scheme.

IBEC’s director of industrial relations Brendan McGinty said 60% of defined benefit schemes would be closed to entrants by mid-2009.

“The cost of providing defined benefit has escalated due to strict funding standards, international accounting requirements, low long-term interest rates, higher pay, poorly performing equities, and a rise in life expectancy.”

These are some of the reasons which have caused concern among employers, according to Unite national officer Jerry Shanahan.

The survey also found 73% of workers are retiring at 65, compared to 64% five years ago.