Estimates of Irish Pension Liabilities 2021

According to the CSO’s 2021 Pensions Coverage Survey 72.7% of those in employment (aged 20 to 69 years) had an occupational pension.  The Pensions Authority estimates that in the same year, there were 86,222 active occupational pension schemes with 971,961 active members. These schemes do not include private personal pension plans such as Personal Retirement Savings Accounts (PRSA) and Retirement Annuity Contracts (RAC).

The total value of funded occupational pension liabilities at the end of 2021 was estimated at €120.9bn, equivalent to 28% of GDP. These are non-government scheme liabilities, 51% of which related to defined benefit schemes estimated at €61.9bn (see Figure 3.1). Defined contribution scheme liabilities were estimated at €59.0bn for the same period.

Column A: Funded occupational defined contribution schemes

According to the 2021 Pensions Coverage Survey, 68.5% of those in employment with an occupational pension identified it was a defined contribution scheme. The Pensions Authority annual report estimates there to be 85,964 active defined contribution schemes with 437,196 active members.

Defined contribution (DC) schemes are occupational pension schemes where member contributions and employer contributions are invested into a fund and the proceeds used to buy a pension and/or other benefits at retirement. The value of the ultimate benefits payable from the DC scheme depends on a number of factors such as the amount of contributions paid, the investment return achieved less any fees and charges, and the cost of buying the benefits.

During 2021, the value of occupational DC scheme liabilities grew by €5.1bn from €53.9bn to €59.0bn, an increase of over 9%. This was mainly due to contributions during the period. Table 2.1 shows an increase in the market price values of assets of €1.1bn, which is recorded in Row 8 of Column A. The other changes that occurred during 2021 which affect the value of the liability at end of 2021 are shown in Figure 2.3.

Column B: Funded occupational defined benefit schemes

According to the 2021 Pensions Coverage Survey, 28% of those in employment with an occupational pension identified it was a defined contribution scheme while another 3.4% identified their scheme as a hybrid scheme. The Pensions Authority annual report estimates there to be 658 active defined benefit and hybrid pension schemes with 534,765 active members.

In a defined benefit (DB) scheme, the pension paid on retirement is related to the combination of the number of years of employed service and the employee’s earnings (this may be at retirement or in the years immediately preceding retirement or on career earnings). Benefits on retirement are not related to a fund performance.

The liability of occupational DB schemes as reported to the Pensions Authority increased by just over €1bn or 1.6%, from €60.9bn to €61.9bn, at the end of 2021 when compared with end of 2020. The level of DB liabilities shown in Table 1.1 is estimated using actuarial calculations based on assumptions about future events. They are not impacted by the investment of the scheme assets. Figure 2.4 shows the breakdown of the movements of the ADL for DB schemes appearing in Column B.

Actual employer and employee contributions to DB schemes during 2021 totalled €1.6bn as recorded in rows 2.1 and 2.3 of Table 1.1. The social contribution supplement recorded in row 2.4, also referred to as the ‘unwinding of the discount rate’, was estimated at €1.5bn.  Payments made from DB schemes, recorded in row 4, totalled €2.1bn in 2021, and include pensions, lump sums and death benefits paid. Transfers of entitlements from DB schemes, mainly to new or existing occupational defined contribution schemes, was estimated as €1.6bn in 2021 and is recorded in row 6. Such transfers reduce the liability of defined benefit schemes at the end of the period.

In 2021 there were no DB schemes which were subject to a Section 50[1]amendment and thus row 7 is recorded as 0. Estimated service charges of €828m are recorded as a reduction in row 2.5.

[1] If the funding of a defined benefit scheme is not sufficient to satisfy the Funding Standard, the trustees may apply to the Pensions Authority for what is referred to as a 'Section 50 order'. Under such an order, accrued benefits relating to members’ past service can be reduced.