Worker mobility poses big pension challenges

The increased mobility of the Irish workforce will pose a serious challenge for Irish pension trustees according to the Irish Association of Pension Funds (IAPF).

According to a pensions expert group, employees today are unlikely to have one career and could be in up to 10 pension schemes over the course of their working life.

James Kavanagh, chairman of the IAPF defined contribution committee, said pension trustees could end up trying to track down a beneficiary who left a company 45 years before his pension matured.

“The Irish workforce today is far more transient than that of 20/30 years ago. For example if someone begins a job at 18, works two years [and so is entitled to their benefits] but leaves at 20 — the company then has to pay out pension benefits in 45 years. That’s a 45-year connection with an employee for a relationship that only lasted two years.”

The IAPF said the construction industry was the worst affected for deferred member pensions. The industry had thousands of pensionable employees during the boom, most of who, have now been made redundant or have left Ireland.

Pension trustees have a responsibility to ensure that pension holders receive their entitlements. Trustees face a difficult task of trying to trace each and every person who left and moved around the globe.

In the face of such a huge administrative burden, Mr Kavanagh called for the proposed national tracing service in the pension framework to be developed.

“We have evidence from our members that in some cases as many as 50% of their pension scheme members have left service and are now deferred members. What is now needed is a robust system that can allow employees to trace their benefits as they move around — a national tracing service would go a long way to delivering this. This was first proposed by the Government in the national pensions framework document and this proposal needs to be developed.”

Separately, the Friends First annual pension survey found that nearly 70% of people surveyed have pensions but 20% of those have reduced or stopped contributing to it due to the financial crisis.