I have been reminded, by our colleague in Cork Willie Gleeson, to the fact that the Government proposes to change the qualifying criteria in 2020 for the State Contributory Pension from the Yearly Average to the Total Contribution Approach (TCA).
The result of this will have a major negative effect on many of our members who take up employment or become self-employed after retirement and pay either class “A” or “S” contributions – and are hoping to eventually qualify for some level of a contributory pension.
The Department of Social Protection has established a consultation period up until September 3rd 2018. Most of the questionnaire is a standard tick box exercise, but there is scope at the end to make any observations or recommendations.
I have completed and submitted this questionnaire, and in my own case I recommended that the qualifying period for a full contributory pension should be thirty years and not forty, and that previous year’s class “B” contributions should be calculable towards the Total Contributions Approach. The reasons being that none of our members retiring after full service will ever have thirty years class “A”, let alone forty, and therefore will never qualify for a full contributory pension; and that because the thirty plus years class “B” contributions should count for something as the TCA based on class “A” contributions alone will seriously reduce any contributory pension due.
The TCA has been sold by the Department as a great champion of the stay at home housewife and maybe it is, but if not fairly computed it will have a really negative impact on many of our members. The end result could be a saving of millions to the Government at a very harsh cost to our members in the guise of decimated pensions.
I believe this important opportunity should be circulated to our Cork City and Nationwide colleagues through head office to give them the chance to have their recommendations and observations logged, and hopefully considered by Government.
Please note the deadline of September 3rd 2018.
Log on to www.welfare.ie/consultations
Cork City GSRMA Branch Committee
New Scenario (Totally different to above) – Government proposal
Workers may have to pay 6% of wages into pension
State, employers and workers will all contribute to planned scheme from 2022
More than 850,000 workers will have up to 6 per cent of their gross pay deducted and put into an occupational pension from 2022, under proposals unveiled yesterday.
The mandatory pension scheme is being introduced to address a stubbornly high level of workers who face retirement on nothing but the State pension. Just 35 per cent of the private sector workforce has private pension coverage.
Under this proposal, which has been put out to public consultation, the Department of Employment Affairs and Social Protection suggests that all PAYE workers between the ages of 23 and 60 earning more than €20,000 will be automatically enrolled in a pension in 2022 if they are not already signed up to a scheme.
They would pay 1 per cent in the first year, which will rise by one percentage point every year until 2027 when they would be contributing 6 per cent. The contributions would be matched by their employer up to a salary of €75,000 and the State would contribute €1 for every €3 saved by the scheme member.
In this scenario, from 2027, workers would see a total of 14 per cent of their gross pay going into a fund for their retirement.
The department says that Ireland is one of only two OECD countries without a mandatory earnings-related element to retirement saving.
The contribution levels are contained in a “strawman proposal” – a fleshed-out draft proposal of how department officials think auto-enrolment could work. It is designed to generate discussion and the department insists it will be revisited in the context of responses to the consultation. Employees, under the proposal, would choose from among four registered providers, selected by a new central processing authority, to manage their pension and select the level of risk they wish to accept. Management charges for the funds would be limited to 0.5 per cent of funds invested. If they don’t choose a provider, one would be allocated.
“Most Irish workers are not saving enough, or indeed at all, for their retirement years,” said Minister for Social Protection Regina Doherty. “Many people will be faced with a serious reduction in their living standards when they retire.”
‘The most fundamental’
The consultation document says, however, that it has sought to ensure that only those people who need the additional savings will be enrolled. It accepts that, for some, the State pension and other State benefits like the household benefits package, may provide enough income in retirement.
The Minister said that automatic enrolment was “perhaps the most fundamental policy reform in a generation in terms of retirement savings provision”.
Ms Doherty said the Government remained committed to the State pension, which “will remain the bedrock of the pension system”. “However, the State pension is not designed or intended to deliver full income adequacy in retirement,” the Minister said.
Brokers Ireland, which represents almost 1,250 broker firms, welcomed publication of the consultation document. It said the contribution levels outlined were “about right” but called for its speedier implementation.
Self-employed people, those earning less than the €20,000 threshold and people falling outside the prescribed ages could opt in.
Workers can opt out but, under the worked example in the consultation paper, only between seven and eight months after being signed up. After that, they are committed to the scheme although they can halt contributions.
Minister for Social Protection Launches the Consultation Process for an Automatic Enrolment Retirement Savings System