Good evening ladies and gentlemen, members of the IAPF and guests.
It is my great pleasure and honour to welcome you to the Annual Dinner of the Irish Association of Pension Funds marking our 47th anniversary.
I particularly want to thank representatives from The Pensions Authority, Dept. of Employment Affairs and Social Protection, Dept. of Finance, The Pensions Council, PensionsEurope, Ibec, service provers including investment managers, employee benefit consultants, actuaries, the accounting and legal professions, insurance companies and most importantly trustees for being here tonight.
The reason I have specifically mentioned each group is to remind ourselves of our commitment to the same goal, the commonality of our purpose which is the financial security for workers in Ireland in retirement.
I am going to come back to this common goal a little later ……
But first of all, I want to recap on just how busy it has been for all of us involved in the pension sector with lots of directives, consultations, and roadmaps both here in Ireland and in Europe.
In Europe we have had the:
- IORP II directive
- The EU Portability Directive & Supplementary Pensions Rights
- The European Central Bank and EIOPA Statistical Reporting
- The EU 4th Anti-Money Laundering Directive & Register of Beneficial Ownership of Trusts.
We have also had numerous pension reviews and consultation papers here in Ireland from:
- The Roadmap for Pension Reform
- The consultation on Automatic Enrolment Retirement Savings System
- The consultation on the regulation of DC master trusts
- The Consultation on Simplification and Reform.
But the question really is what are all of these consultations, roadmaps and directives doing for workers and how is it improving their retirement outcomes.
Now when you come to giving a speech on an occasion like this you take a little look to see what your predecessors have said, how they structured their thoughts.
In doing this I noted in 2016 Jim Foley discussed the Pensions Council and the Universal Retirement Savings Group and the IAPF support for auto enrolment.
In 2015 Rachael Ingle talked about our support of increased coverage and how to deliver secure, fair and simple pensions and the need for trust in our pensions system.
In 2018 Peter Fahy talked about our support for auto-enrolment and in 2019 again Peter expressed our support for auto-enrolment and a sensible implement of IORP II.
And here I am in 2020 really saying the same thing, as there has been very little progression AND this is simply not good enough. However neither is it good enough to suggest this is government sole its responsibility. Of course government is essential to moving forward but so is everyone in this room.
We are all aware of the enormous challenges and changes that have affected us as individual and impacted pension provision over recent decades. Most impactful have been:-
The increased life expectancy – great news for us as individuals but significant implications for everyone when it comes to their ability to finance an adequate income in retirement
With increased longevity comes the pressure or indeed the desire to remain in the workforce for longer and the need for more flexible ways of working. If this is the future then we need policy review in this area to align pension and employment legislation.
The collapse of interest rates – means we now have a situation where banks charge to mind money and buying a guaranteed pension for life is a choice few DC retirees are making. However should you want to secure a €30k annual pension, increasing by CPI with an associated dependent pension the cost is c. €1.23m. The implication being that €1m is not what it used to be. Therefore, any change to the standard fund threshold will impact on those who do not see themselves as high earners and we are concerned that this is not fully understood?
The almost universal change from DB to DC – has resulted the shifting of risk to employees . Employees are now exposed to market risk and interest rate risk and this impacts them both in pre and post retirement. While Trustees work hard to develop good default solutions with good de-risking glide paths in the pre-retirement phase once a member moves into retirement that support infrastructure is removed. However, before we even consider the post-retirement phase we have significant issues to address in the pre-retirement phase:-
People are not saving enough and not enough people are in pension plans
- Firstly only 1 in 3 private sectors workers have a pension plan
- Based on experience shared by some of the large insurance companies the average DC retirement pot is €61k. Let’s assume all current retirees have had some DB service so we will double the pot to €120k. Based on current annuity rates this provides an annual income of €3,000. It is simply not enough.
So while not enough private sector workers have a pension plan, many of those that have are not saving enough so we need to solve both coverage and adequacy.
Also it would be remiss of me standing here tonight as a female not to highlight the fact that for women the position is even worse. Given their interrupted careers, resulting slower career progression, often lower pay and longer life expectancy there is an even bigger problem to solve for women.
Now many of you will know it is extraordinarily difficult and sometimes frustrating to get members to engage with their pension. Yet during the recent election pensions was the 3rd most important issue raised by the electorate based on exit polls. So if pensions ranked that high then we know we need to address coverage, adequacy and simplicity. To do otherwise would be a grave disservice to individuals and society as a whole. Ireland cannot afford a financially dependent retired population. This is a fact. So things need to change. We need to stop suggesting that this is the responsibility of government, the regulatory, Europe, the providers, employers. Because in truth this responsibilities rests with us all
Therefore the IAPF is calling for:-
- The appointment of a Pension Minister. We recognise the really good work that was done in the publication of A Roadmap for Pension Reform. Thus appoint a Minister whose primarily responsibility is to work with all stakeholders to implement this plan. Introduce auto-enrolment. It may not be perfect, but we will learn and evolve as has every other OECD country. We are later to auto-enrolment that most and can therefore learn from their mistakes.
- Do nothing rash with the Standard Fund Threshold – a €1m cap will impact on ordinary workers. As stated earlier a pension of €30k costs c. €1.23m today
- Focus on the sustainability of the national pensions system. Embrace the positive implication of longer lives by taking a more joined up approach to pension and employment legislation. Do not reduce the pension age as it will have long-term and significant impacts on Ireland’s finances. However, we recognise the need to provide for those you need or want to retire early and the right of retirees to be treated with respect and dignity.
As I said at the beginning we have senior representatives here tonight from all stakeholders. We share a common goal, a common purpose. There is nothing this group cannot achieve if we put our minds to it. There were 3 key issues raised at exit polls throughout the country during the recent elections.
Those issues were health, housing and pensions. While health and housing problems are not our focus, pensions are, and together we can fix the pension system.
With this in mind the IAPF in the coming weeks and months will be arranging a series of meetings with senior representatives from all stakeholders group to agree the path forward and to ensure delivery of a pension system that makes Ireland a great place to retire in. This should be a social contract between government, political parties, regulators, employer, unions and service providers. I ask that you accept these invitations, embrace the idea of a social contract focused on making Ireland’s pension system a global standard. And in this regard the IAPF looks forward to engaging with each and every one of you
Finally there are a number of people I specifically want to thank tonight. So just bear with me for a few more minutes.
I would like to pay tribute to the invaluable work done by our various voluntary committees. I specifically want to thank
- our Benefits Committee led by Peter Griffin
- DC Committee led by Colm Fortune
- Investment Committee led by Liam Stack
- Regulatory and Administration Group led by Tom Gilligan
- Regional and Southern Group led by John O’Callaghan
- Large Funds Forum led by Tony Murray.
I want to thank my fellow Council members, who bring a huge diversity of expertise and experience to shaping the policy and direction of the Association. I particularly want to thank our Vice-Chair, Ann Prendergast and I look forward to working with Ann over the coming year.
Jerry Moriarty the IAPF’s chief executive works tirelessly and effectively on behalf of our members in Ireland and Europe. The role that Jerry fulfils for us in Europe is even more important now that the UK is no longer part of the EU. We will need a strong voice to fill the void left by the UK exit in terms of a trust based, common law occupational pension system and Jerry provides this for us. I also want to thank Matti Leppälä from Pension Europe for travelling to be here with us this evening. Personally I want to use the opportunity to thank Jerry for his support to me over the past 12 months, it has been invaluable.
Jerry is supported by an excellent team in the IAPF namely Deirdre Ross, Kelley McMenamin, Amy Peat and Rachel Frires. They do wonderful work in running the Association and organising our conferences and other events.
Finally, I want to thank you for your attendance here tonight and your attendance at our events during the year. I look forward to speaking with many of you this evening and working together over the coming weeks, months and years to make Ireland a great place to retire in.
I hope you enjoy the rest of the evening. Thank you.