Ireland’s pension system has improved slightly in the past year when compared with global peers, a new index has found.
The Mercer CFA Institute Global Pension Index ranked Ireland’s retirement income system in 13th place, up one spot from a year earlier.
It follows a modest increase in its index score, from 70 last year to 70.2 this year, its highest result since its inclusion in 2014.
However, its performance in the sub-indices that make up the overall result was mixed, with it ranking just 24th on the measure of sustainability, but a slightly better 14th for adequacy and 10th on integrity.
“The growing use of master trusts within the Irish market should result in a further increase in our integrity score in the future due to the professionally run nature of these schemes and additional associated regulatory oversight,” said Caitriona MacGuinness, DC and Private Wealth Leader for Mercer in Ireland.
Government plans to introduce pension autoenrollment should also boost Ireland’s future result, she added.
“The government has spoken for many years about introducing an automatic enrolment retirement savings regime in Ireland. It is currently preparing to launch this system next year and its introduction should increase the overall index value for Ireland’s pension system,” Ms MacGuinness said.
“This new regime should see an increase in the number of people saving for their retirement, and over time it should also improve the eventual adequacy of saving and reduce dependence on the State Pension.”
It is the third year in a row that Ireland’s overall system index score has improved.
First on the list was the Netherlands, followed by Iceland and Denmark.
“The average age of populations around the world continues to rise in many markets, mainly more mature markets,” said Margaret Franklin, CFA, President and CEO, CFA Institute.
“Inflation and rising interest rates have created a new market dynamic that poses significant challenges to pension plans. We also see continued fracturing as it relates to globalisation.”
“These are just a few of the increasingly complex challenges that pension funds face that impact retirees in significant ways.”
The analysis also looks at the role artificial intelligence (AI) could play in improving pension and social security systems.
These include more efficient and better-informed decision-making leading to higher real investment returns, improving member engagement and helping individuals make long-term decisions about their financial decisions.
However, Mercer said AI carries risks, including modelling challenges, ethical concerns and the need for optimal data privacy and cybersecurity.
As a result, AI models must have strong governance and clear accountability, said Dr David Knox, Senior Partner at Mercer and lead author of the report, in order to reduce biases and unjustified responses.