This month, we delve into three critical aspects shaping the Irish pension landscape:
the Master Trust market
the gender pension gap
the alignment of retirement ages.
Master Trust market insights
In recent weeks we released our report on the Master Trust market in Ireland, the first of its kind in the Irish market. This timing reflects how Master Trusts have become a pivotal part of the Irish pension landscape, mirroring their growth in other jurisdictions.
Our report is designed to support employers who are contemplating a shift to a Master Trust, as well as those who have already made the transition. It offers insights into the Master Trust market and the potential value these trusts can offer, and evaluates whether employers’ pension schemes are delivering that value.
What’s inside the report?
The report covers:
an overview of the Master Trust market in Ireland
predictions for the future landscape
analysis of the strengths and weaknesses of Master Trusts
suggestions on how employers can improve the employee experience through Master Trusts.
Key takeaways
Master Trusts have grown to almost 50% of the defined contribution market in Ireland, and this growth trajectory continues today with over €22 billion in assets.
Master Trusts scaled at a significant pace during 2023.
This scaling brings operational challenges across all Master Trusts.
Oversight is critical to ensure a continued positive and sustainable experience for members and employers.
Master Trusts will continue to evolve and enhance their propositions.
Consolidation of some Master Trusts is likely in the future, which will have implications for members.
The report highlights several key factors for a successful transition to a Master Trust, including:
aligning your pension communications with your company’s reward communications cycle and broader benefits
ensuring the type, content and frequency of communications are appropriate for your workforce
understanding the roles and responsibilities of trustees, sponsoring employer and founder of the Master Trust.
Overcoming challenges
The report acknowledges the administrative challenges rapidly growing Master Trusts face and emphasises the importance of strong oversight from employers to ensure members are not affected. Because this is a fully outsourced pension solution, your employees will likely expect this oversight.
Looking ahead
The report underscores the need for employers to view transitioning to a Master Trust as the start of a journey, not the end. It encourages employers to ensure they reap the benefits a Master Trust offers, to maximise its impact for members.
At PwC, we’ve supported a wide spectrum of employers, with schemes ranging from less than €10m up to €500m in assets, as they’ve looked to select a suitable Master Trust, transition to it and establish a strong ongoing oversight framework.
The gender pension gap
In recent months, the gender pension gap issue has gained prominence in Ireland. The focus on auto-enrolment has increased awareness around it.
The gender pension gap refers to the disparity in retirement savings between men and women. Figures from research conducted by the Economic and Social Research Institute (ESRI), funded by the Pensions Council, reveal that prior to the Covid pandemic, this gap stood at about 35%.
There are two key factors contributing to the gender pension gap:
1. Salary differences
Women often earn less than men, leading to disparities in pension contributions.
2. Working patterns
Women are more likely to take time out of the workforce to raise children and care for relatives. This can result in women working a significantly shorter period of time than their male counterparts.
These factors can lead to a large difference in the level of income men and women get from pensions, both private and occupational.
Growing numbers of employers are seeking help in understanding and addressing their gender pay gap — this will have a direct impact on the first contributing factor.
The second factor is harder to solve, particularly where the person is not employed, eg a carer. Women —especially those in part-time or low-income jobs —often miss out on pension contributions. There’s debate on whether the introduction of auto-enrolment will help address this in any meaningful way. Changes to how State pensions are determined (as outlined in our prior Pulse) will help, particularly for carers.
Alignment of retirement ages
The Government has approved the drafting of the Employment (Restriction of Certain Mandatory Retirement Ages) Bill 2024. This bill aims to address retirement age policies and empower employees with more flexibility regarding their retirement decisions.
The bill introduces a statutory provision that allows, but does not compel, an employee to continue working until they reach the State Pension age — now 66. This provision recognises some people may choose to remain in the workforce beyond their contractual retirement age.
In addition, under the new legislation, employers will be restricted from imposing a compulsory retirement age below the State Pension age without the employee’s explicit consent.
This consent-based approach acknowledges many workers may prefer to retire at the age specified in their employment contracts. The bill also includes provisions for specific exemptions that apply in cases where retirement ages are already defined by law, or when an employer can provide objective justification for a different retirement age.
Employers should consider the implications of the legislation for their pension scheme, along with its impact on employee working patterns and associated retirement policies and procedures.
How can we help?
Auto-enrolment strategy, Master Trust consideration and retirement policies are all important topics employers are considering in 2024.
The gender pensions gap is a longer-term issue that requires change at a policy and employer practice level.
Our Pensions team offers independent market perspective and expert advice to help you identify a sustainable way forward.
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