Almost 40 per cent of all Irish defined benefit pension schemes are now closed to new entrants, and this is expected to rise to 60 per cent over next three years, according to a survey by Mercer Human Resource Consulting.
Mercer’s survey reveals that 38 per cent of defined benefit pension schemes are now closed to new employees, with a further 22 per cent of employers planning to close their defined benefit pension schemes to new employees within the next three years.
Around 500,000 employees are members of defined benefit pension schemes in Ireland, and as a result generally expect to receive pension benefits related to service and salary at or around the time of retirement.
Michael Madden, European principal with Mercer commented, ‘Although over 60 per cent of defined benefit schemes in Ireland are still open to new employees, we seem to be heading in the direction of the UK where it is estimated that over two-thirds of defined benefit schemes are now closed to new entrants’.
New employees are generally provided with either a defined contribution pension scheme or a PRSA. This means that new employees receive a pension based on the value of their contributions and the employer’s contributions. Madden however, cautioned, ‘A move from a defined benefit pension scheme to a defined contribution pension scheme transfers a significant amount of risk from employer to employee. In order to understand these risks, and ensure that their retirement savings are adequate, members need good communication and education in a DC scheme’. |
