SFA Opposes Mandatory Pension Provision PR

Monday, 25 May 2015

  • SFA opposes the introduction of a mandatory pension system
  • Mandatory pensions would be costly for employees, businesses and the Exchequer

The Small Firms Association (SFA) rejects the idea of a mandatory pension system in Ireland. In its submission to the Department of Social Protection working group charged with creating a roadmap for universal pensions, the SFA has stated that while it recognises the importance of the Government’s ambition to build a sustainable pensions system for the future, it is fundamentally opposed to any move towards a mandatory Universal Retirement Savings System.

Patricia Callan, SFA Director, stated: “It is clear that the current pension provision needs to be enhanced to meet the demands of future retirees but we are by no means convinced that mandatory pension provision is the best option. Mandatory pension provision will prove costly to employees, to business and to the Exchequer, without any associated benefits in the long term. As such, the willingness of both employees and employers to accept compulsory pension savings is seriously questionable.”

The SFA has set out its stance on the current pensions debate in eight key points:
    1. The SFA is opposed to any increase in the cost of employment
    2. Any new pensions regime should be offset by a reduction in PRSI
    3. More should be done to promote and incentivise supplementary voluntary pension provision
    4. A review of State Pension provision is needed
    5. There is a need for specific focus on equity for self-employed people
    6. There should be greater focus on increasing numbers at work to improve the ratio of workers to pensioners
    7. The future of the private pensions industry must be considered
    8. A universal pensions scheme poses a risk to national competitiveness

Callan emphasised that: “With the economic recovery slow to be felt by small businesses, many are still struggling to keep their doors open. In this context, where cost control and reduction remain critical for small businesses, it is unacceptable to impose an increase in the cost of employment. Any direct contribution obligations on employers will simply add to the already high cost base, where labour costs are running at 121% of the EU average. Moreover, employers will be faced with demands for compensation by employees for any apparent reduction in their real take-home pay. These employees already have little disposable income due to our current high income tax / PRSI / USC regime, and very high mortgage variable rates and childcare costs. The cost of mandatory pension provision to the economy as a whole is also a prohibitive factor. The Exchequer contribution has to be funded by the tax base, which is made up of business and employees, so each group will effectively be hit twice. The introduction of a Universal Retirement Savings System will increase unit labour costs in Ireland, putting many jobs and businesses at risk. It will negatively impact national competitiveness and jeopardise foreign direct investment into Ireland. ”

“The Government’s focus is all wrong. There are many aspects of the pension system that require urgent attention, such as the inequity of treatment between public sector workers and those in the private sector, especially owner-managers,” continued Callan.

“The SFA strongly believes that credible alternatives to a mandatory Universal Retirement Savings System are available and should be pursued as a matter of urgency. These include encouraging supplementary voluntary pension provision, providing an adequate State Pension, reviewing public service pensions and increasing the numbers at work in Ireland,” concluded Callan.


The full submission by the SFA to the Department of Social Protection Universal Retirement Savings Group is attached.

For queries and interviews, please contact: Patricia Callan, Director, Small Firms Association, at Tel: 087 6999345, e-mail: patricia.callan@sfa.ie, Twitter: @SFA_Irl