From 2022, employees without private pensions will be enrolled automatically in a retirement savings scheme in order to address the massive pensions deficit looming over the country.

Those who do not want to avail of the scheme will have to opt out, it was confirmed.

Also planned is a move to a “total contributions approach” for the State (contributory) pension from 2020, replacing the controversial “yearly average” approach.

Revealing the most radical plans in decades, Social Protection Minister Regina Doherty said it was “increasingly clear that people in the private sector are not saving enough, or at all” for their retirement.

The plans will see all private sector workers over a certain age and income level automatically signed up for a pension into which the employee, the employer, and the State will contribute.

From 2020, the Government will reform the State contributory pension so that entitlement is based on the total number of PRSI contributions made over a person’s working life.

The Government also proposes to link future increases in the State pension to inflation to ensure it continues to be paid at a rate of 34% of average earnings as well as allowing people to work longer — deferring their State pension in return for a larger payment later in life.

Further increases in the State pension age before 2035 have been ruled out, meaning that people will be eligible for the State pension at age 66 up to 2021, 67 from 2021 to 2028 and 68 from 2028 onwards.

Taoiseach Leo Varadkar said: “Thankfully we are all living longer... This is a very welcome development. Nonetheless, a population that is living longer brings with it its own policy challenges.

“It is important and timely that we now move to establish a more equitable and transparent State pension system,” he added.

Jerry Moriarty, chief executive of the Irish Association of Pension Funds (IAPF), said the changes to the system have been long called for.

“The pensions community has been crying out for a simplification of pension and tax rules for some time. There are currently too many rules which confuse and frustrate those attempting to save for retirement,” he said.

“We are hopeful that these reforms will deal with much of this unnecessary complexity.”

The change from defined benefit to defined contribution schemes has placed a lot of responsibility on individuals, so it’s important that they can easily understand the decisions that they need to make, he added.

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