Pension Funds Association rejects mandatory pensions

The introduction of mandatory pensions in Ireland would increase coverage but the pension system could collapse as a result according to the Eagle Star pensions director.

Mr Brendan Johnston stated at the Irish Association of Pension Funds annual conference today that it would be a "political minefield" to introduce a mandatory pension system with workers viewing it as further taxation and employers seeing it as an additional cost of employment.

Mr. Johnston said that any mandatory scheme would be introduced with lower contributions than most existing defined contribution schemes.

“The danger is that this would become the norm to the serious detriment of pension provision in general.”

There would also be pressure for significant Government involvement which would be “an administrative nightmare”. He added: “There are risks that the whole system could fall apart.”

Chairman of the IAPF Joe Byrne also expressed doubts about the introduction of mandatory pensions: “While we fully support finding means of increasing pensions coverage, we are not yet convinced that mandatory is the best way of achieving this.”

He said that it was premature to talk of mandatory pensions when the current voluntary system has not been developed sufficiently to attract lower income earners.

“Individuals are faced at different stages of their lives with different demands and may not be able to fund for a pension at that particular time. Once mandatory is introduced, there would be great difficulty in unravelling it.”

Mr. Johnston said that while mandatory pensions had been introduced successfully in Australia he did not believe that this would be acceptable to the Irish public.

“Try telling the Irish that they must contribute to a pension to the detriment of paying off a mortgage or education fees. Just because Australia makes fine wines does not mean you can grow vines on the banks of the Liffey.”