It is widely accepted that Irish pensions are unnecessarily complex. They are part of an evolution which has taken place in a piece-meal fashion over the years. Many, many rules were created, not as part of an overall Government plan – there wasn’t any - but by Revenue in response to perceived threats to the Exchequer.
Other rules were derived from the implementation of Government policy – PRSAs being an obvious example. In these instances, the simplicity envisaged in the original design became corrupted by the need to incorporate the new idea into the existing confused world of pensions. Ironically, the PRSA was intended to be an answer to complexity – not the cause of it.
A further layer of complication arises from our membership of the EU with additional rules being derived from the implementation or direct applicability of EU Directives and Regulations.
No wonder we ended up where we are.
The government proposes to drive through this maze of complexity with its Roadmap for Pensions Reform which was published in June 2018. The process recognises the complexity of the existing system by dividing the process into 6 separate strands dealing with different aspects of the pensions landscape. Strand 2 contains the proposal from the Department of Social Protection in relation to Auto-enrolment. A key part of this process involves the creation of yet another pension structure or process. Evidently, the lessons have not been learned from the introduction of the PRSA earlier this century!
In the next blog on pensions reform, we will have a look at the proposals for auto-enrolment, and why they are off target!
Author: Tommy Nielsen
*Please note this content is the view of the author and not of Independent Trustee Company