Pension provision for most private sector workers in Ireland is now likely to be on a defined contribution (DC) model, even for senior executives. Defined contribution schemes are favoured as they offer flexibility and portability for members yet better meet the cost/risk appetite of employers.
More recently, there is a growing realisation that current DC scheme offerings may not provide an adequate or the anticipated income in retirement. This potentially creates reputational risk for the company and the risk that key employees may leave if they find a better deal elsewhere (particularly when the good times emerge again). These have been demonstrated and exacerbated by the fall in global equity markets and low interest rates.
There has also been a step change in the pensions playing field, with significant legislative and tax changes. At the very least, these have precipitated the need to consider whether current contribution structures remain appropriate and efficient; more fundamentally, they have called into question whether pensions continue to remain the most appropriate long term savings vehicle, at least for senior employees. The emergence of bundled long term savings vehicles (so called “corporate wraps”) and other alternatives, largely in response to these issues, creates interesting opportunities and possibilities.
Tackling these challenges (and opportunities!) to ensure that plans are durable (for today and tomorrow), sustainable and desirable will be key to attracting, retaining and motivating employees in the future. Deloitte is working with a number of companies who want to know whether their scheme remains current and “fit for purpose” and have developed a five point assessment that focuses on what we believe addresses the key areas of concern/ opportunity.
More generally, we have extensive experience of helping corporates design and implement 'next generation' DC design and savings solutions. Our services include:
Please do not hesitate to contact a member of our Pensions and Reward Services team with any queries you might have.