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Total accrued-to-date liabilities of Irish pension schemes amounted to €767.3bn, 177% of GDP or 329% of modified GNI (GNI*) at the end of 2021. The majority, €470.7bn, relates to liabilities of the Social Insurance Fund (column H), followed by the liabilities of the public sector occupational pensions (column G) at €175.7bn with private occupational pensions (column C) accounting for €120.9bn of the total liability. Table1.1 presents the opening balance, the movements during the year and closing balance of pension liabilities in Ireland for 2021.
Figure 1.1 presents the share of each component of the total liability in 2021. Social security pension schemes of the Social Insurance Fund include the State Pensions (Contributory), the Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension, and the Invalidity Pension and account for 61% of the total liability. The liabilities of public service defined benefit schemes are the next largest component (23%). Finally, the funded occupational schemes of private sector workers make up the remainder with both defined benefit and defined contribution schemes accounting for 16% of the total liability.
State pensions and pension schemes for government employees are unfunded in that they operate on a pay-as-you-go (PAYG) basis whereby current workers' contributions are financing current pensioners’ benefits. These schemes, appearing in columns G and H of Table 1.1, are managed by government and are not included in the core national accounts. In contrast, funded non-government workplace pensions are part of the national accounts and are presented in columns A and B of Table 1.1 above.
Table 1.1 presents Irish pension liabilities according to a number of categories: -
Table 1.2 summarises this classification.
| Breakdown of pension liability 2021 | |
| Defined benefit schemes for government employees | 22.9 |
| Social security pension schemes | 61.3 |
| Occupa tional defined benefit schemes (non- government) | 8.1 |
| Occupational defined contribution schemes (non-government) | 7.7 |
Chapter 2 provides more information on Funded Occupational Schemes and Chapter 3 provides more information Government Managed Schemes.
As the 2021 estimates use the same discount rate as the previous 2018 estimates it is possible to make some direct comparisons. The total pension liability has increased by €159.5bn or 26% since end 2018. The Social Insurance Fund liability increased by €111.5bn or 31%, the public sector occupational pension liability increased by €26.1bn or 17% and private occupational pension liabilities increased by €21.9bn or 22%. Table 1.3 presents the revised balance sheet for pension liabilities in 2018. This includes some technical updates to the constituent parts of the table. See chapter on funded occupational schemes for more details.
The contribution each type of pension scheme makes to the total liability in 2018 is very similar to that observed in 2021.
The inclusion of the unfunded pension liabilities in the pensions table aims to increase comparability across EU countries. This comparison has also been facilitated by the use of common assumptions in each country. The size of the pension liabilities greatly depends on these assumptions, particularly the choice of discount rate. In order to ensure comparability and smooth the fluctuations of the estimates over time, Eurostat recommends setting the discount rate at 2% in real terms (after adjusting for price inflation), and 4% in nominal terms, for the estimation of government managed pension schemes.
Ireland’s total liability in 2021 equates to 177% of GDP (or 329% of GNI*). Figure 1.2 shows Ireland in comparison to other countries for which comparable data is available[1] .The total accrued-to-date liability of pension providers in Switzerland was €2,530bn at the end of 2020, equating to 389% of Swiss GDP. In Latvia, the liability was €79.2bn or 263% of GDP. It is clear from the graph that Ireland’s pension liability is low in comparison to some European countries, illustrating the relatively young population. As demographic developments take effect and the number of people aged 65 and over continues to increase in Ireland, the pension liability will increase to take account of the growing numbers accruing rights to and in receipt of a pension. In contrast, those EU countries with a more mature population should experience a more gradual growth in their liabilities.
[1] Data sourced from Eurostat website. The transmission of ESA Table 29 is only mandatory every three years. Some countries provide data for intervening years on a voluntary basis. At the time of publication, data for 2021 has not yet been published by Eurostat.
| X-axis label | % of GDP |
|---|---|
| Ireland (2021) | 177 |
| Latvia | 263 |
| Czechia | 308 |
| Lithuania | 315 |
| Sweden | 318 |
| Ireland, (GNI*, 2021) | 329 |
| Finland | 356 |
| Switzerland | 389 |
Figure 1.3 shows the relative importance of the liability for private and public sector schemes in the pension systems across a selection of European countries for which data was available. In Ireland, the social security schemes (i.e. the State Pension (Contributory), Invalidity Pension and Widow’s, Widower's or Surviving Partner's (Contributory) Pension) is 61% of the total liability. Sweden and Switzerland show a similar share; while for Latvia, Lithuania, Czechia and Finland the proportion increases to 90% and over.
| Social Security Schemes | Schemes for Government Employees | Non-Government Managed Schemes | |
| Ireland (2021) | 61 | 23 | 16 |
| Switzerland | 62 | 5 | 33 |
| Sweden | 67 | 3 | 30 |
| Latvia | 90 | 3 | 7 |
| Lithuania | 95 | 2 | 3 |
| Czechia | 97 | 0 | 3 |
| Finland | 99 | 0 | 1 |
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