THOUSANDS of workers could be forced to pay more towards their pension as research shows most defined benefit (DB) schemes are insolvent.
Pension experts, Mercer said one in four schemes are planning to increase member contributions, as the cost of providing pensions has soared.
There are close to 600,000 members of DB schemes in Ireland.
Senior consultant with Mercer, Aisling Kennedy said it is not surprising.
“The financial crisis in global markets has resulted in a severe setback for the funding of defined benefit pension schemes. Higher life expectancy has also increased the cost of pension provision.
“Employers and trustees are working on measures to fund deficits and to put pension schemes on a sustainable footing. This may require changes to benefits and/or higher contributions from scheme members.”
Mercer said that strong investment returns over the last six months has not been sufficient to lift most schemes out of deficit.
It said few schemes have submitted funding proposals to the Pensions Board. Around 10% of schemes were due to finalise their plans by the end of this year but the board extended this deadline to June 2010.
“2010 will be a significant milestone for Irish defined benefit pension schemes, as employers and trustees reach conclusions as to how to address scheme deficits; the scale of the deficits will trigger significant structural changes to many schemes.”
Schemes at 200 organisations were reviewed for the study. Over half expect to maintain current benefit structures, with the employer making higher contributions to fund the deficit.
However, Mercer expects that this might change over the course of next year, as firms come to terms with the scale of costs involved.
One in five is considering stopping any further benefits being earned in the defined benefit scheme, so employees will continue to have a defined benefit pension for past service but will be in a defined contribution or some form of hybrid scheme going forward.
One in seven schemes is considering a change to benefits that members have already earned. This will require an application to the Pensions Board. A similar proportion are considering winding-up their scheme.
One-third of schemes are planning to eliminate the deficit in less than 10 years, another third intend to formulate a 10-year plan, and less than 10% plan to apply to the Pensions Board for a period of more than 10 years over which to fund the deficit.
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