The Irish retirement income system scored 70 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Ireland’s retirement income system is comprised of a State Pension at the national level, voluntary company pension plans at the occupational level, and private products at the individual level.
National Level
The State Pension consists of two parts: a flat-rate contributory state pension given to those who meet the contribution conditions, and a means-tested non-contributory state pension to provide a safety net for the low-income elderly population of Ireland.
The state pension can be claimed from the age of 66 in 2021 (gradually rising to 68 by 2028). The State pension age was due to rise to 67 in 2021 but the government has delayed this change and instead established a Pension Commission to reevaluate any change in the State pension age. For the contributory state pension, employees generally are required to contribute 4% (same for self-employed) of their weekly covered earnings. The minimum weekly earning used to calculate contribution is €352.01. Employers are required to contribute 8.6% of their employees’ gross payroll for those whose earnings are below €376, and 10.85% for those whose earnings are above €376. Full entitlement requires an average of 48 weeks’ contributions or credits per year throughout an individual’s working life. An individual’s pension value is reduced for incomplete contribution histories. There is a minimum total period of paid contributions of 520 weeks (i.e., 10 years’ full coverage). Eventual public pension entitlement is not affected by periods of unemployment, provided at least 520 weeks of contributions are paid over the course of the working life. The basic State Pension benefit is €248.30 (€237 for noncontributory citizens) per week, with an additional €10 a week paid if the receiver is over 80; an additional €9 per week if the receiver is aged 66 or older and living alone. Individuals may claim their pensions while still working. There is no provision to defer claiming.
Occupational Level
Voluntary occupational employee plans provide supplementary income in retirement and currently cover around 50% of the working population. An occupational pension consists of contributory, non-contributory, funded or unfunded, defined benefit, defined contribution, or hybrid of the both. Pension plans in Ireland have historically been defined benefit in nature, but there has been a major shift toward defined contribution schemes in recent years. For contributory schemes, both employee and employer contribute; for non-contributory schemes, only employers are required to contribute. The return of these schemes can be claimed as regular income after retirement or a lump-sum payment.
In general, large employers in Ireland have occupational schemes for employees, but many smaller employers do not. Each pension scheme has its own set of rules, although they are generally regulated by the government Pensions Authority. By law, employers who do not provide such schemes, or if certain restrictions apply to their schemes, must ensure that their employees have access to at least one Standard Personal Retirement Savings Accounts (PRSA), an alternative individual private pension savings account (see Individual Level section)
Individuals may also make Additional Voluntary Contributions (AVCs) to their occupational pensions. AVCs are contributions an individual makes to their occupational pension benefits to build up an additional retirement fund; effectively, a “top-up” option for those whose occupational pension benefits fall short. Employers must offer access to at least one standard PRSA to any employee who is not eligible to join an occupational pension scheme within six months of their hiring and a PRSA for AVC purposes if there is no facility for AVCs in their scheme.
Individual Level
Lastly, private voluntary savings opportunities are available. The two main types of personal pension plan are the PRSA and Retirement Annuity Contract (RAC).
PRSAs were created in 2003 and provide benefits based on individual contributions and the investment returns on those contributions. PRSAs are available to citizens regardless of their job or employment status, are owned by individuals, and can be transferred from job to job.
The RAC is an arrangement made by a self-employed person or an employee, generally a person who is not a member of an occupational pension scheme, to provide a pension in retirement or to pass on to surviving dependants on death. RACs are governed by tax legislation and financial services legislation, and not regulated by the Pensions Authority.
Summary Sources
OECD. “Pension Country Profile: Ireland.” 2019. Accessed 04/21/2020.
Citizens Information. “Occupational pensions.” Updated April 3, 2019. Accessed 04/21/2020.
Citizens Information. “Paying social insurance (PRSI).” January 7, 2021. Accessed 07/08/2021.
Citizens Information. “State Pension (Non-Contributory).” January 2021. Accessed 07/08/2021.
Easy Life Cover. “A Guide To Occupational Pensions in Ireland.” Accessed 04/21/2020.
Pensions Authority. “Private pensions: Retirement Annuity Contracts and Trust RACs.” Accessed 04/21/2020.
Pensions Authority. “State Pensions.” Accessed 07/08/2021.
Social Security Administration. “Social Security Programs Throughout the World: Europe, 2018 (Ireland).” September 2018. Accessed 04/21/2020.
Current Issues
Following debates, roadmaps, and committee reports (see section below), in March 2022, Minister for Social Protection Heather Humphreys introduced a proposal for the Automatic Enrollment Retirement Savings System for Ireland. The aim of this program is to minimize the coverage gap, which may be as large as 65% for private sector workers, or representing 750,000 workers, according to the Irish government. The plan will automatically enroll all employees who meet the eligibility criteria that do not already have an occupational pension plan, or workers between ages 23 and 60 who earn over €20,000 per year; there is an option to opt-out after six months, but automatic re-enrollment will occur two years later. Those outside the eligibility criteria will be able to opt-in voluntarily. The scheme includes employer matching and ‘State Top-up’; employee and employer contributions will start at 1.5% in 2024 and increase every year until reaching 6% in 2034. The government will match 0.5% of worker earnings, this number will eventually rise to 2%. The government and employer contribution are each applicable to maximum of €80,000 of earnings.
Some skepticism around the proposal has arisen due to its 0.5% cap on administrative and management fees. Additionally, introducing a whole new scheme on top of the multiple options already available has given rise to fears that workers may feel overwhelmed. However, the move has also been welcomed by many, as auto-enrollment provides an easy, accessible option for workers who have not had the time to consider the retirement plans yet.
The Irish ministerial cabinet has given the draft legislation the go-ahead.
Summary Sources
Addleshaw Goddard LLP. “Pension reform: Ireland moves closer to pensions auto-enrolment scheme.” Lexology. April 5, 2022. Accessed 04/06/2022.
“Irish government announces details of an automatic enrolment pension system for the private sector in Ireland.” Lewis Silkin. March 31, 2022. Accessed 04/06/2022.
Meskill, Tommy. “Cabinet gives go-ahead for new private sector pension scheme.” RTE. March 29, 2022. Accessed 04/06/2022.
“New Workplace Pension Scheme for Ireland – Minister Humphreys announces details of Automatic Enrolment Retirement Savings System.” Department of Social Protection. Updated April 4, 2022. Accessed 04/06/2022.
Pope, Conor. “The State’s auto-enrolment pension scheme: How it works and why it’s good news.” The Irish Times. April 4, 2022. Accessed 04/06/2022.
Current Issues
Ireland is currently implementing one of the most wide-ranging pension reform programs in the developed world. The Irish government is seeking to “overhaul” its pension system income with a road-mapped plan for reforms lasting from 2018 to 2023 一 “A Roadmap for Pensions Reform 2018-2023.” These reforms included plans to set a benchmark of 34% of average earnings for the contributory state pension and link future changes in rates of payment to changes in prices and average wages. However, this proposal has not yet been implemented.
Also among the provisions is a Total Contributions Approach (TCA) for the State Pension (Contributory) that was set to be introduced in 2020 (which has now been delayed further) that will make the benefits received directly proportionate to the number of social insurance contributions made by a person over their working life, with significant credits granted to those who have taken time out of the workplace to perform caring duties, in the form of a HomeCaring Credit. The value of state pension payments will be maintained at 34–35% of average earnings and future increases will be explicitly linked to changes in prices or wages.
In addition, as previously noted above, a new “Automatic Enrollment” defined contribution retirement savings system will be introduced as of 2022 to encourage personal savings. This is one component of the reform proposals that has momentum to date and is actively being considered.
The reforms also seek to improve pension governance standards and regulatory capacity. Reforms of government employee pension schemes have been included to ensure the sustainability of the system, while safeguarding the delivery of promised retirement benefits. The reforms also seek to provide greater individual flexibility in retirement decisions and support for fuller working lives in both public and private sector employment.
The Irish government’s progress on implementing reforms to the State Pension has been delayed. The plans for reform to the State Pension including instituting the TCA did not happen by the third quarter of 2020 as originally planned and have been pushed back to 2022. In addition, while the government plans to roll out its new auto-enrollment savings plan starting from 2022, proposals finalizing the features of that plan have yet to be completed. One such feature under review is extending the phase-in timeline for the new system from the original six years to ten. In addition, the government must establish the structure of the organization responsible for overseeing the rollout of the automatic enrollment, as well as build a new IT infrastructure to support implementation of the new system.
The Commission on Pensions, convened in November 2020 to examine the State pension system, was set to release a report in early July 2021 with its recommendations for raising the retirement age and other potential reforms; after a four-month delay, the report was finally released in October 2021. The delay was attributed to the technical difficulties of the commission’s meeting and cooperating during the pandemic
When commissioning the report, the government agreed to review its recommendations and act within 6 months of the report’s release. As noted, there has been movement to implement the auto-enrollment provisions of the report recommendations.
The report made several comments and recommendations about the government’s proposal:
- It is paramount to shore up the fiscal sustainability of the State Pension program. The ways in which this can be achieved are: the ‘entire community’ will pay a dedicated annual contribution to the Social Insurance Fund from general taxation, existing and future pensioners and employers will gradually pay more PRSI, the retirement age will be increased (but much more gradually than previously proposed).
- For this, a separate account in the Social Insurance Fund for State Pensions should be created; this would aid the ease of calculating levels of contribution, enable any funds in the account to be ring-fenced for State Pension expenditure and not used for other payments, and increase transparency.
- The recommended contribution rate from general taxation is 10% of the annual State Pension Contributory expenditure.
- The commission concludes that a combination of the measures mentioned above will be optimal to achieve social sustainability and minimize the financial and social impact on any one sector of society.
- Instead of the previously proposed retirement age increase to 67 in 2021, the commission instead proposes a three-month annual increase so that the retirement age will reach 67 in 2031 and 68 in 2039.
- Include provisions for deferred access to the State Pension Contributory up to the age of 70, with an actuarial increase in the weekly rate of payment; and deferred access with continued payment of full PRSI contributions past State Pension age.
- Increase flexibility in retirement by allowing those with a long TCA record to retire early at 65 with a full pension.
- Emphasize the need for enhanced transparency and ongoing communication relating to State Pension reform to secure public understanding of the importance of sustainability, certainty, and poverty prevention.
- The Government should immediately implement the smoothed earnings approach to benchmarking and indexation as outlined in the Roadmap for Social Inclusion 2020 – 2025
- Support the establishment of an independent standing body that would advise the Government on pension rates of payment.
- Recommend that the full transition to a Total Contributions Approach and the abolition of the Yearly Average approach to calculating entitlement to the State Pension Contributory rate of payment should be implemented as soon as possible.
- Continue efforts to broaden the PRSI contributor base so as to reduce the burden placed on all contributors.
Summary Sources
Department of Social Protection. “Report of the Commission on Pensions.” October 7, 2021. Accessed 03/28/22
Department of Social Protection. “Report of the Commission on Pensions.” Last updated November 23, 2021. Accessed 03/28/22
Department of Employment Affairs and Social Protection, Government of Ireland. “A Roadmap for Pensions Reform 2018 – 2023.” Accessed 10/11/2019.
Dominic, Coyle. “Minister Concedes State Pension Reform Plans Put back to 2021.” The Irish Times. December 20, 2019. Accessed 04/21/2020.
Dominic, Coyle. “Pensions Reform Should Be High on Everyone’s Political Agenda.” The Irish Times. February 04, 2020. Accessed 04/21/2020.
McQuinn, Cormac. “Report examining qualifying age for State pension delayed.” The Irish Times. July 07, 2021. Accessed 07/27/2021.
Moss, Gail. “Ireland Misses 80% of Target Dates in Pension Reform Plans.” IPE. June 03, 2019. Accessed 10/11/2019.
Moss, Gail. “Irish Government Approves Key Auto-enrolment Provisions.” IPE. October 31, 2019. Accessed 11/12/2019.
Nick, Reeve. “Ireland’s Pensions: All Set for Big Changes.” IPE. February 2020. Accessed 04/21/2020.
The Social Protection Committee. “The 2021 Pension Adequacy Report: current and future income adequacy in old age in the EU.” The Council of the European Union. June 04, 2021. Accessed 07/27/2021.
Weston, Charlie. “Fears of new delay in roll-out of national pension plan.” The Independent. November 22, 2021. Accessed 03/28/2022.
Source: Georgetown University’s Center for Retirement Initiatives
Last Updated 3/30/22