The Irish Association of Pension Funds (IAPF) has said the issue of universal pensions has been parked for too long.
Speaking ahead of the body's half-day annual conference in Dublin, IAPF chief executive Jerry Moriarty said we owed it to future generations to start working on the issue now in order to pre-empt the challenges of changing demographics. Minister for Social Protection Leo Varadkar, who is speaking at the conference, has said he supports a universal system, but has warned that introducing a new system will be complex.
Moriarty also called for changes in the way the solvency of defined benefit (DB) pension schemes is measured. The IAPF says a big issue for trustees is the continuing increase in the valuation of the liabilities of DB schemes, as a result of being tied to historically low interest rates.
The number of active DB schemes has fallen from just over 1,200 at the end of 2016 to fewer than 500 today. The number of active members in those schemes has dropped from 270,000 to 126,000 at the end of last year.
Moriarty said those that had survived had done so only because "considerable effort and pain", with employees accepting reductions in benefits and employers greater contributions.
"So, despite reducing the schemes’ liabilities and increasing assets, schemes are continuing to see the value of those liabilities rising because of the link to interest rates. Interest rates continue to remain low because of the quantitative easing policies of central banks and it is difficult to see when and how those policies will end," he said.
Moriarty said it would be a tragedy if DB schemes were forced to wind up because of the way their liabilities are valued. He said private DB schemes do not have to go to the market to fund annuities, but it is assumed that they do for minimum funding standard calculations.