Demographic Review And International Perspective Accounting Essay


The average person spends 90,000 hours at work over their lifetime. The problem is, with increased life expectancy around the world, it is not enough. There is probably no more than a couple of these hours pass where the average worker does not think about packing it all in and retiring to the Bahamas. The aspiration to retire in the first world has not changed and nor will it in the future. While the aspiration to retire remains what is very uncertain is how this can be accomplished financially. With our rapidly changing world, the fact is that not only do private pensions have a future, but with the uncertainty around state provision and defined benefit arrangements it is not hard to imagine a future where private pension saving forms the cornerstone of all retirement planning.

In examining the future of personal pensions we firstly consider the demographic trends around Europe, the position of Ireland, and what this means for retirement planning. From the research it is clear that counties are struggling to provide traditional retirement benefits for their people and we examine what steps countries including Ireland are taking to combat this leading to the increased importance of private pension saving. Next we reflect on the impact of our Government's legislation on private pension saving and how the most recent legislation points to a future where private pension provision remains an essential pillar in their plans. We then look into the future and address the states plans for pension provision in Ireland and the need the affect consumer behaviour with policies such as auto enrolment. Lastly we discuss the pension industry itself and the negative impact it has had on the country's attitude to private pensions and what it can do to ensure that it plays its role in building a system that leads to increased confidence and understanding of the essential role private pensions will play in our future.

Demographic Review and International Perspective

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Otto Von Bismarck, lauded as the Godfather of the modern pension scheme, clearly grasped the concept of the sustainability of such pension schemes by conferring pensions at 70 to Prussians whose life expectancy averaged 45. Bismarck's pragmatism would be of value today because, as life expectancy increases globally, there are serious concerns around society's continuing ability to provide an adequate standard of living for retirees.

The figures are stark. Looking across the EU as a whole, by 1995 the number of older persons within the EU had already surpassed the number of children. This indicates that under the median variant, the average age of the population in the European Union will go beyond 47 years by 2050 by which time the Dependency Ratio across the EU will deteriorate from the current 4:1 to 2:1. By 2030, the working population within the EU27 will have fallen by more than twenty one million people, by which time the number of people over sixty-five will represent 20% of the population. [1] 

These developments are likely to have serious economic and social consequences, and threaten the ability of individual States to provide any significant pensions support to its population. The need for fundamental pension's reform is apparent globally, and states are grappling with the problem by cutting public expenditure in the area in order to maintain the viability of the various pension systems. As they do so, it is increasingly evident that individuals will be increasingly responsible for ensuring they have adequately provided for their own retirement income.

The demographic trends outlined above raise two important questions for Ireland. Firstly, what is our relative position (demographically-speaking) and, secondly, can we learn anything from policy initiatives being undertaken elsewhere? The answer to the first question is that, from a statistical perspective, there are a number of positives in terms of Ireland's demographic profile when compared with our peers within the OECD & EU.

Fortunately, for Ireland, between 2010 and 2060, population growth is forecasted to be the strongest across Europe at +46%. [2] This builds on recent trends - helped by both inward migration and the fertility rate - whereby Ireland increased its population by 15.2% to 4.59 million persons over the period 2003-2012. Ireland had the highest percentage increase in population between 2001 and 2011 in the EU, at a time then eight EU countries experienced population decline over the same period. The rate of natural increase of the population in Ireland was 10.4 per 1,000 population in 2010 compared with an average of 1 per 1,000 in the EU. The EU rate was consistently below 1 over the period 2001-2005 before rising to 1 in 2006, whereas the rate for Ireland increased from 7.1 per 1,000 in 2001. Expressed as a percentage of those aged 15-64, Ireland had the highest proportion of persons aged under 15 in the EU (31.9%) and the second lowest proportion of persons aged 65 and over (17.3%) in 2011. [3] 

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The population growth has impacted strongly on Ireland's demographic profile but whilst there have been marked improvements in terms of life expectancy at birth, interestingly the figures for Ireland are lower than the EU average (see table below) so statistically we are not living as long as our European counterparts. (Source: CSO. Measuring Ireland's Progress 2011)

Average Life Expectancy













Other reasons to be positive, other than demographic trends, include Ireland's policy initiative to increase the statutory retirement age to 68 by 2028, and it is important to stress that this is matched only by the UK within the OECD (where the projected average by 2030 is 64). In addition, Ireland is one of the few OECD countries where labour-market exit happens (on average) close to the normal pensionable age, so people in Ireland are already working longer when compared to the international norm. Public expenditure on pensions as a percentage of GDP has been relatively low compared to the OECD average, helped by favourable demographics (3.4% of GDP in 2007 vs. an OECD average of 6.2%). This is projected to continue into the future (5.4% in 2030 vs. 10% in OECD). Existing and projected fertility rates here will alleviate some of the burden - Ireland's replacement rate is higher than both the OECD and EU27 average, and this is projected to continue (for example for the period 2015-2020 Ireland's fertility rate is 1.87 versus 1.71 for the OECD and 1.61 for the EU27). [4] 

Having benchmarked Ireland's demographic position against OECD peers, it is apparent that Ireland's position could be worse, in relative terms. But the situation is still serious, and therefore the situation warrants the examination of the various policy initiatives to date in other OECD countries, where three broad areas have been the focus of attention. The first solution being arrived globally is to legislate for employees to have longer working lives. The good news is that half of the OECD countries have, or are in the process of, increasing the statutory pension age from the current averages (63 for men and 62 for women). The average retirement age is therefore projected to be almost 65 for both by 2050 but, whilst this is positive, it should be borne in mind that increases in life expectancy will outstrip the proposed increase in pension ages in all but six OECD member countries The good news from Ireland's perspective is that the aforementioned move to increase the retirement age will ensure we keep pace with projected increases in life expectancy. However the retirement age increases elsewhere won't even be sufficient to stabilise the length of retirement (based upon current projections of increased life expectancy).

The second approach, taken by seven OECD-member countries to date, is to formalise a link between pension levels and life expectancy, with the net result that pension benefits will fall as people live longer. In practical terms there are a range of options to do this, including the substitution of public defined benefit pensions with defined contribution pensions, and the replacing 'pay-as-you-go' public pensions with 'notional accounts'. The third approach globally is to encourage employees to save for their own retirement as state spending falls. Automatic enrolment programmes such as New Zealand's 'Kiwisaver' scheme and the German 'Riester' pensions have had widespread take-up and similar schemes are mandatory elsewhere.

Having analysed the various policy initiatives and pensions taxonomies globally, there are a number of interesting observations. Firstly, Ireland's defined benefit scheme for public sector workers is increasingly anachronistic in global terms. To date, seven OECD countries have replaced all or part of their public, defined benefit scheme with a private, defined contribution plan. In three others, there is now a requirement to pay in to a private defined contribution scheme which is there to augment the basic state pension. Four other countries have adopted 'notional accounts' schemes (effectively defined contribution) and others - even ' cradle to grave' societies such as France and Finland- have retained defined benefit schemes but in such schemes benefits will be reduced by a factor directly related to life expectancy.

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Secondly, Ireland is one of two countries (New Zealand being the other) that does not have a mandatory, 'second-tier' provision for private sector employees to augment the basic state provided pension. However, although it is not mandatory, New Zealand's 'Kiwisaver' automatic enrolment programme has enjoyed widespread take-up (Ireland does not operate a similar scheme yet, although it is a pivotal plank of the National Pensions Framework document of 2010). Thirdly, the state pension is basic in relative terms (with a gross replacement rate of 29% vs. OECD average of 57.3%) Finally, we have a relative inability to spend limited money wisely and equitably, and this manifests itself in the level of income poverty in old age in Ireland. New Zealand and Ireland both spend a relatively small percentage of GDP on public pensions (3.4% in Ireland, 4.1% in New Zealand and 6.2% in OECD) and the income of Over 65's relative to the overall population is similar (65.9% in Ireland, 68% in New Zealand) but the level of income poverty in old age is much lower in New Zealand (30.6% in Ireland, 1.5% in New Zealand)

So in summary, by international standards we seem to have a polarised pension system. We have a relatively basic state pension, we lack a mandatory or automatic-enrolment second-tier scheme to ensure a better post-retirement income for private sector workers, and this is against the backdrop of an expensive defined benefit scheme for public sector workers which is increasingly at odds with the OECD norm. Having considered the current status quo, it would be informative to look at how we have arrived at this point by looking at legislative and policy changes in recent years.

Legislation Changes and Their Effect on Personal Pension Saving

Over the last two and a half decades there has been substantial change to the legislation which covers private pensions. These numerous changes have served to create an atmosphere of uncertainty for private pension holders and this uncertainty has negatively impacted pension funding strategy presently and for the future.

The major changes since 1999 are summarised as follows:


Introduction of Approved Retirement Funds (ARF) for self-employed and 20% Directors. (Section 19 of the Finance Act 1999).

Increase in tax relief limits for individual contributions for those over age 30. 30 to 39 - 20%, 40 to 49 - 25%, 50+ - 30%. Also certain sports people - 30%.

2002 to 2009

Introduction of earnings limit for tax relief on contributions by an individual of €254,000. (Section 14 of the Finance Act 2003).

Investment restrictions on non-arm's length transactions for ARF and AMRF. (Section 14 of the Finance Act 2003).

Borrowing permitted by company pension schemes. (Section 16 of the Finance Act 2004).

Introduction of Standard Fund Threshold of €5,000,000. Introduction of Maximum Tax Free Lump Sum of €1,250,000. (Section 14 of the Finance Act 2006).

Increase in tax relief limits for individual contributions for those over age 55. 55 to 59 - 35%, 60+ - 40%. (Section 14 of the Finance Act 2006).

Imputed Drawdown for ARFs - 1% in 2007, 2% in 2008, 3% in 2009. (Section 14 of the Finance Act 2006).

Earnings limit for tax relief on contributions by an individual reduced to €150,000. (Section 16 of the Finance Act (No. 2) 2008).


Standard Fund Threshold reduced to €2,300,000. (Section 19 of the Finance Act 2011).

ARF imputed drawdown goes to 5% with effect in 2010. (Section 19 of the Finance Act 2011).

Maximum Tax Free Lump Sum reduced to €200,000. Lump sum taxed at 20% between €200,000 and €575,000. (Section 19 of the Finance Act 2011).

Earnings limit for tax relief on contributions by an individual reduced to €115,000. (Section 19 of the Finance Act 2011).

PRSI relief removed for employees in respect of their own individual contributions.

Extension of ARF options to all members of Defined Contribution schemes. (Section 19 of the Finance Act 2011).

AMRF requirement increased to €119,800 and guaranteed income requirement increased to €18,000. Both linked to Social Welfare State Pension (Contributory). (Section 19 of the Finance Act 2011).

Pension Levy of 0.6% of the value of pre-retirement pensions to apply for 4 years from 2011 to 2014. (Finance (No. 2) Act 2011).

Imputed drawdown extended to vested PRSAs and increased to 6% for funds over €2 million. (Section 18 of the Finance Act 2012).

Relief of 50% of employer PRSI for employee contributions via payroll to occupational pension and other pension arrangements is removed.

Finance Act 2013

Limited early withdrawals allowed from AVC's - up to 30% of the value subject to marginal rate of tax. (Section 16 of Finance Act 2013)

Commitment that the pension levy will not be extended beyond 2014.

Reinstatement of the previous thresholds of €63,500 AMRF or guaranteed income of €12,700, before an individual can invest in an ARF. (Section 16 of Finance Act 2013)

The continuous changes outlined above have invariably influenced the funding strategies of private pension holders. The changes in the early years were seen as positive as investors gained more control over their pension assets. However the changes in later years have created a tentative environment for private pension investors. The greatest impact on the psychology of private pension holders has been the changes since 2011. The introduction of the Pension Levy in the Finance No. 2 Act 2011 in particular created an environment of great uncertainty and damaged confidence in retirement planning

It also cannot be underestimated the affect that proposed changes can have on people's behaviour towards pension funding. These changes presently include the intention to reduce private pension tax relief from marginal rates (up to 41%) to 20%. [5] The minister also indicated that from 2014, arrangements will be put in place to cap subsidies if the pension delivers an income of more than €60,000. The minister did not confirm what the new standard fund threshold would be, but consultation is to continue between the pensions sector and the relevant government departments. (Budget 2013)

In 2012 Amarach Research examined the effect of the uncertainty of future tax relief on private pension contributions on 'people's attitudes and behaviours towards pensions and their personal schemes.' [6] 

When asked 'what impact if any would the following reductions in pension tax relief have on your pension contributions?' 35% responded that they would 'reduce contributions' and 8% said that they would 'stop contributions if tax relief was reduced to 20%. The figures were similar when asked if tax relief was reduced to 30%.

When asked why they had reduced or stopped their pension contributions 29% said it was due to 'uncertainty about likely value of future pension due to tax/other changes'

This research shows how proposed changes by the government can have an immense impact on the funding strategy of private pension holders.

The most recent budget has started to give the much needed clarity on how the legislative environment is going to look into the future. It also affirmed the government's support of second tier provision for retirement through private pension coverage. The marginal income tax relief was retained and the Minister confirmed that the pension levy would not be renewed after 2014. [7] There is still uncertainty around how the cap on income of €60,000 p.a. in retirement will work. However an allowance of a pension which delivers an income of €60,000 per annum demonstrates the government support of private pension planning. Whilst this is positive the Government must now provide pension savers with a stable environment to allow them to plan for their retirement with some level of certainty.

Government Policy and the Need to Effect Consumer Behaviour

The state has undertaken considerable consultation work in order to deal with the obvious need to reform pensions in this country as highlighted by the Green paper and McCarthy report. To address matters, the Government has commenced the introduction of its National pension framework that was published in 2010. 

The Government's stance is that the state pension will continue to play an integral part of retirement planning in this country. They are committed to maintaining the level of state pension at 35% of the average weekly wage. They are addressing the scale of funding by extending the normal retirement age to 68 and by amending the entitlements under the number of prsi contributions made (520-10yrs) to obtain the minimum weekly pension, as opposed to averaging of contributions which has been the case. [8] While continuance of the social welfare pension is a government stance they acknowledge the inadequacy of this funding alone for retirement and need for a change in private pensions. 

The other fundamental reform proposed by the government to address retirement funding in the private sector is the auto enrolment mechanism for employees who are not associated with an established occupational pension schemes.  While 2014 had been earmarked to initiate this policy, it was subject to prevailing economic conditions at the time which remain challenging. This measure when introduced, is hoped to address the lack of pension coverage addressed in is paper. 

Features of this policy will include opt out opportunities in the case where people have an affordability issue or based upon earning bands. People will have the option to opt out at any time with re auto enrolment after 2 years. There will be a bonus for people who maintain contributions for 5 years which is positive. [9] 

Another feature will be a simplification of the tax relief on contributions in this scheme from marginal/standard rate to standard 33% which can be extended to people in occupational pension schemes. While it may simplify matters, there is no overall improvement in the incentives here, but is obviously a big commitment by the government in support of private pensions moving forward, especially for middle/lower paid workers. 

While the above measure seek to address the coverage of pensions, success will be dependent upon its impact on behaviours.

The process of auto enrolment deals with one of the major behavioural issues preventing private pension provision - inertia. Numerous research provides evidence that when it comes to pension provision, inertia impacts considerably. A 2012 Friends First Survey found 37% of respondents held no pension, with 36% of those having not thought about retirement needs. The auto enrolment measure being introduced tackles this issue. Providing an opt out feature, retains a level of empowerment people will desire. People, through the exact same inertia, will tend delay any decision to opt out of their pension fund given they retain the power to do so.

While the prevailing economic conditions will determine the commencement of this programme, research says that auto enrolment fares better in a poor performing economy than compulsory enrolment or optional enrolment which should serve the programme well in Ireland at present. 

Other factor effecting behaviours and which result in people tending not to dedicate sufficient time to pension provision is 

         -lack of understanding of the process/options.

         -lack of trust regarding investment/provider performance

As outlined in the industry analysis section on this paper, changes need to be made by industry itself but the government need to implement its own change agenda. The NPF does feature intentions by government of improving financial education/ simplifying products and empowering the investors regarding their choice of funds/provider. While these are welcome developments and should be a focus, providing too much flexibility for fund choices requires consideration as this might provide investors with too much influence and increase confusion rather than simplifying pensions which should be the focus and which will influence the level of contribution. 

When it comes to influencing behaviours regarding long term savings in the form of pension provisions, a significant influencer is monetary incentives in the form of tax relief or bonus. While the government proposes to provide a bonus for continuous 5 year funding in auto en-enrolment this will need to be further detailed/promoted strongly to have the desired impact. From reading of the framework, while the tax incentives / reliefs continue for contributions and will be simplified, it appears that tax relief moving forward will benefit those on middle/lower paid workers while not for higher paid workers which may cause some reluctance for maximum funding in this demographic.

Overall, there are significant and positive steps in the Governments push for Private pensions and the underscores the requirement for Private Pensions in the future

Industry Challenges and The need for Reform

People's inertia has been identified as one of the fundamental reasons for the low coverage of supplementary personal pension saving. It can be argued however that inertia in the financial services industry is as much to blame. In the 1998 National Pensions Initiative Report by the Pensions Board it was noted that a major contributing factor to the lack of pension coverage was the pension industry itself. It highlighted the high costs of setting up pensions, lack of understanding and confusing nature of pensions by the public at large. But of most concern it noted that there was "distrust of financial institutions and intermediaries". The 2004 National Pension Review once again identified the same negative view in respect of charges, lack of understanding and suspicion of the industry itself. The 2012 Report on Pension Charges by the Department of Social Welfare highlighted the opaque nature of the industry and mistrust felt towards the industry. This is a damning reflection on an industry charged with promoting and managing personal pensions in Ireland. What has the industry done to combat these issues and what can it do in the future to ensure that personal pension saving is not only encouraged but seen as essential.

The perceived high cost of personal pension savings coupled with poor investment return has done little to encourage pension coverage. The 2012 Report on Pension Charges once again highlighted the effect of charges on the amount people were able to save. It noted;

"the level of charges has the impact in notional terms of reducing the value of the projected final fund value by between 8.4% and 31%"

The report has largely been dismissed by the industry as an attempt to divert the public's attention away from the government's raid on private pension saving with the controversial 0.6% jobs levy. Its assumptions methodology and findings have also been called into question by academics. [10] However it does demonstrate how much of an effect a modest looking charge can have on the final figure a pension saver is able to accumulate. The inverse of this is obviously any reduction in charges can have a huge positive effect on accumulated funds. It also shows a huge variance in both disclosed and implicit charges among providers.

Current industry trends is to try and reduce charges and costs by a move from more costly actively managed strategy to lower cost passively and index tracking strategy. Recent research in the U.K. found that active fund managers added 0.38% to the annual cost of their funds whereas tracking funds added only .1%. [11] In Ireland which does not benefit from the same economies of scale it has been estimated that actively managed funds can add as much as 2.35% to the cost. [12] 

This move is something that should be welcomed as long as cost savings are passed onto the consumer. However it does not tackle the real problem in respect of charges for the industry. This is the lack of a method for the public to compare and assess the value and impact of both declared and implicit costs when choosing a plan. Regulators have tried to make the effects of charges more transparent through increased reporting and compliance. The industry complains about this increased burden and passes costs to the consumers. The consumer is confused and complains about the amount of paper they are sent in the post and its confusing nature. Once again the 2012 Report on Charges recommends increased regulation to make pensions more transparent. It is a vicious circle. The report also points out that pension charges have largely remained unchanged even with the huge increase in regulation over the last 15 years.

The question is why can the industry not take the lead on this issue? Why can it not be agreed between all stakeholders of a common simple method of accessing the impact on charges on a consumer's savings? Instead of complaining in respect of the additional burden increased regulation places on it, why can the industry make regulation a non-issue by providing a solution that gives the consumer access to information to make an informed choice? The advantages of a common method of accessing the impact on charges would be hugely beneficial. It would create more trust with the public through increased transparency. It would mean increased competition between providers resulting in lower costs for the consumer. It would ensure more of the benefits of investing will be passed on to the consumer's retirement savings. The fact that there appears to be an unwillingness to address this issue only adds to the mistrust of the industry.

It is clear that the current system does not provide transparency in respect of costs. It is beyond the scope of this report to suggest the actual method of comparison and it is acknowledged that it will require significant work. However if the industry wants to enhance its reputation and increase personal pension saving it is an essential step.

What is also clear is that the public do not understand pensions or the essential need to plan for retirement. The current industry norm is to provide literature both written and on the web and to run advertising campaigns particularly in September and October, traditionally months where the self-employed make tax payments. Also government bodies such as the Pensions Board provide excellent information on their websites. However the problem persists that the public largely do not see the importance of retirement planning. Again this is an opportunity to do something differently. The lack of financial education in our schools curriculum is evident. A report in the UK by has shown how lack of financial education costs the UK around €3.4 billion per year through poor elementary financial decisions by the ordinary public. The report also showed that people armed with better financial skills would be more likely to plan their retirement effectively. It would be in the Irish Financial Industry's best interests to actively explore this opportunity and to offer its services both financially and with expertise to our education system. The amount of goodwill this would generate to the industry both from the public and government would benefit the industry's reputation and the increased financial education would help to ensure people recognised the reality and importance of retirement planning.

Investment Performance is cyclical just like the markets they follow. Indeed the 2004 National Pensions Review highlighted the strong performance of equities as a reason for a slight increase in the popularity of pensions. The Annual Report 2011 of the Pension Ombudsman highlights the main consumer issues in respect of investment performance. The most common complaints were noted as the lack of disinvestment approaching retirement and inadequate risk rating of investment funds. The industry has acknowledged these shortcomings and moved to a more detailed approach through the use of psychometric questions to properly assess a customer's appetite and understanding of investment risk. The vast majority if not all providers have improved considerably the risk level classification of their funds and matching these with a client's expectation. This coupled with the move towards a lifestyling approach must be continued and constantly improved to maximise client's returns and to manage expectations.

One of the cornerstones of the current regulation in respect of the advice offered by an intermediary and provider is the need to issue a suitability statement. This statement is a comprehensive statement as to why the product advised is in the client's best interest. The fact that this document is seen as necessary highlights the biggest issue the industry must address. Government policy has been to clear up the industry's opaque nature through regulation that ensured transparency. However the fundamental issue lies in the fact that as long as intermediaries and advisers are compensated by the pension providers directly there will always be a conflict of interest either real or perceived. This remuneration model has created a transaction based sales culture rather than a fee for service approach. The 2012 Report on Pension Charges once again highlights concern at the large amount of rebroking occurring both with occupational and personal pension arrangements. A fee based approach does not rely on the sale of a product for an advisor to be paid. As long as this sales based culture exists the industry will always be viewed with suspicion and the potential for abuse exist. A move to a fee based approach would mean that an advisors and client's financial incentives are aligned. A conflict of interest would no longer exist.

A move to a truly independent and fee based advisory service in the industry will ultimately solve many of the industry's issues and address the public's trust concerns. No longer could an advisors loyalty be called into question. Professional advisors acting on behalf of paying clients would demand the very best from the providers and ensure consumers were getting the best deal subject to their circumstances. The need for regulation would be largely reduced. The current regulation is largely a product of a providers need to sell a product and an advisors need to sell a product to be paid and the relationship between the two. If this relationship did not exist confidence in the industry would increase. Consumers would also ultimately benefit from reduced charges as providers would no longer be required to pay commissions both trail and initial which would have a large beneficial effect on a client's fund accumulation.

The current remuneration model encourages a short term mentality as advisors receive their payment up front with no need for further client engagement. A fee based approach would reverse this and ensure that the client's retirement needs were more proactively addressed and managed throughout their lives. A move to this model would require a seismic shift in both the industry and the consumer's mind-set. It would involve a lot of pain. However if we want to build a profession that is trusted and respected it must happen.


The challenges are so significant that no one stakeholder can resolve the issues alone. The state must take action on a number of fronts. Firstly, it needs to formalise the link between pension levels and projected life expectancy. This will send a clear message that people will have to have longer working lives, and it will also allow people to enjoy higher levels of benefits if they work to a retirement age reflects the projected increases in life expectancy. In tandem with this, the state needs to abolish (or at least severely curtail) inherent incentives in the system to retire early. This can occur by increasing the number of year's contributions, the eligibility age for early retirement, or both.

Thirdly, people will need to be actively encourage to stay in the workforce later, on the basis that benefits could be enhanced, and not just maintained. OECD pension models indicate that typical replacement rates could increase from 52% at 60 years to 60% at 65 and 72% at 70. The Government must also ensure that age discrimination legislation is robust enough, and working conditions sufficiently attractive, to ensure older workers can stay in employment beyond what was traditionally seen as the normal retirement age. It also needs to spend limited money in a more targeted fashion, to reduce the relatively high level of income poverty in old age in Ireland.

Finally, the Government needs to expedite the rollout of an auto-enrolment mechanism for employees who are not part of an occupational pension scheme. Such a scheme must strike a balance between offering sufficient fund choice without an offering that is so bewildering that it proves off-putting. The nature and extent of monetary incentives will also significantly influence the extent to which investors stay in the scheme for the long term.

In essence the government need to create an environment that is simple and stable that encourages rather than

As for the industry itself, it cannot simply wait for Government to legislate to ensure the future viability of the pensions industry. The current remuneration model needs to change to a fee based model to eliminate the transactional nature of the company/client relationship. The industry will continue to have a credibility issue as long as the current (sales based) culture exists. Self-regulation around areas such as transparency around charges would also be hugely beneficial. It must also work hand in glove with Government to ensure a higher level of financial education amongst our citizens. Addressing the lack of financial education in our schools would be more effective than simply the publication of brochures. Quite simply, financial literacy must be seen as an integral part of the school curriculum at secondary level.

Lastly, the most important stakeholder in the equation is the investor. Living longer lives is the proverbial 'First World problem', but providing for retirement will increasingly be the responsibility of the individual. For the retiree of the future, doing nothing is not an option.