Pension coverage needs to be improved

Shannon Chamber HR is a dedicated HR and Employment Law Support Service for members of Shannon Chamber provided in partnership with Adare Human Resource Management, experts in Employment Law, Industrial Relations, Human Resources and Health & Safety at preferential rates.

In this week’s article, Sarah Fagan, Managing Director of Adare Human Resource Management looks at recent figures from the CSO in relation to pensions coverage and considerations for employers around the introduction of auto-enrolment pension schemes.

According to the Central Statistics Office, a third of the working population have no pension coverage other than the State pension[1]. Three quarters of those with supplementary pension coverage said it is provided through their employment, with 11% holding a personal pension plan and 16% with both. Unsurprisingly, younger workers have the lowest level of coverage with just a quarter of workers aged 20-24 having pension cover, up marginally from 24% a year earlier. That compares to around 74% of 55–69-year-olds.

Of those employees that do not have a pension, just over half (53%) said their employer does not offer a scheme.

Defined benefit schemes continue to decrease with just 28% of employers offering them, down from 34% in 2020.

HR Barometer Report (November 2021)

Based on our most recent HR Barometer Report (November 2021), the number of organisations contributing to their employee pensions is slightly down on the previous year; 66% in Q4 2021 with 71% in 2020.

The average contribution made by Employers to Employee pensions is 4.8%, down on our HR Barometer Report from 2020, which found that the average contribution was 6%. However, previous reports in 2018 and 2019 found the average contribution to be in line with this year at 5%.

Auto-enrolment pension scheme

According to the most recent soundings from the Government, the planned introduction of the auto-enrolment pension scheme is now set for the end of 2023, having originally been planned for this year. It is expected that every employee earning over €20,000 will be automatically included in the scheme.

Under the scheme, it is expected that for every €2 paid in by the employee, the state will contribute €1 with an additional €2 from the employer. This detail has yet to be confirmed but the detail will involve contributions from workers, employers and the state.

Considerations for employers

The challenge for employers will be the additional costs to the business due to additional pension contributions given the number of additional employees that will be covered by the scheme. Employers will also have to consider any rules or guidance on what to do with employees who are already in either a defined benefit or defined contribution scheme.

One additional consideration is the plans to extend the age to qualify for the State pension, which is currently 66. It was expected to increase this to 67 last year but that decision has been reversed. The HR Barometer Report (November 2021) found that the majority (64%) of employers have set the retirement age at 65. And nearly all (93%) have no plans to increase their retirement age. However, eight in ten stated that they would allow employees to work beyond retirement age – this in turn may add to the overall cost of employers’ pension contributions in an auto-enrolment situation.

Why Shannon Chamber HR?

  • Access to solutions-focused advice and support on HR and Employment Law queries for your Organisation provided by the experienced expert-led team at Adare Human Resource Management, giving you peace of mind that you can effectively manage any employment or HR issues that may arise. For information on the full range of services and supports provided, click here.

For further information on the HR and Employment Law support services provided, to arrange a meeting or to receive a quote, contact the team at Shannon Chamber – / 061 475 854.