Government announce major changes to pensions in Ireland in the ‘Roadmap for Pensions Reform 2018-2023’

28th February, 2018

  • A Total Contributions Approach (TCA) for the State Pension (Contributory) will be introduced from 2020, including a new ‘HomeCaring Credit’.
  • The value of State pension payments will be maintained at 34% of average earnings. Future increases will be explicitly linked to changes in prices and/or wages.
  • A new ‘Automatic Enrolment’ retirement savings system will be introduced from 2022 to support and encourage personal savings provision.
  • Improvements in pension scheme governance standards and regulatory capacity.
  • Enhanced supports for “Defined Benefit” pension schemes to provide improved levels of protection for scheme members and beneficiaries.
  • Reforms to public service pensions to ensure the sustainability whilst safeguarding the delivery of promised retirement benefits.
  • Greater individual flexibility in retirement decisions and support for fuller working lives in both public and private sector employment.


 A major reform of future State, private and public service pension provision was announced today (Wednesday 2) at Government buildings by An Taoiseach Leo Varadkar T.D., the Minister for Finance and Public Expenditure and Reform Paschal Donohoe T.D. and the Minister for Employment Affairs and Social Protection Regina Doherty T.D.


In launching the five year “Roadmap for Pensions Reform” the Taoiseach confirmed Government’s key goals are to “create a fairer and simpler contributory pension system where a person’s pension outcome reflects their social insurance contributions, and in parallel, create a new and necessary culture of personal retirement saving in Ireland”.


Making the announcement The Taoiseach said:

‘Thankfully, we are all now living longer and many children born in Ireland in 2018 will live to be over 100.  This is a very welcome development. Nonetheless, a population that is living longer brings with it its own policy challenges, not least in terms of social insurance and in ensuring the future sustainability and security of the State pension system.”


“It is important and timely that we now move to establish a more equitable and transparent State pension system. To do this, we will put in place important pension reforms and also promote better levels of private pension coverage to help supplement future retirement incomes. In combination, these measures will deliver us with a fit for purpose pension system for future generations of pensioners in Ireland”.


The measures in the “Roadmap for Pensions Reform 2018-2023’ reflect the broad intent of the Programme for a Partnership Government which highlighted the importance of long term thinking to address long term pension policy challenges. 


Commenting on the announcement the Taoiseach added:

Pensions Reform has been an important objective for me since my time as Minister for Social Protection.  When I  announced my new Government to the Dáil last June,  I highlighted this as a priority area..  The system is facing a number of challenges in relation to population changes, income adequacy in retirement and ensuring the sustainability of the Government finances.  The task of financing increasing pension spending will fall to a diminishing share of the population as demographic projections indicate that the ratio of people of working age to every person aged over State pension age will reduce from its current rate of 4.5 to 1, to just 2.3 to 1 over the next 40 years.”


In outlining the measures contained with the Roadmap for Pensions Reform, the Minister for Employment Affairs & Social Protection Regina Doherty T.D. said:

The two most fundamental reform measures contained within this plan relate to the introduction of the Total Contributions Approach to the State pension from 2020 and the implementation of an ‘Automatic Enrolment’ supplementary retirement savings system for employees without pensions coverage from 2022”.


In addition to these major reforms, the Government will also take measures to improve transparency and confidence in the operational environment for private pensions and improve scheme governance and regulation. 


The State pension will be reformed and will remain as the fundamental bedrock of the pension system in Ireland.  To do this, the Government will introduce from 2020 a ‘Total Contributions Approach’ (TCA) for the State Pension (Contributory).  The TCA is advanced as a more logical and transparent system, where the individual’s lifetime contribution will more closely match the benefit received.


Under TCA, a person’s contributory pension will be proportionate to the contributions they make, with fair regard for periods of child rearing, full time caring, and periods in receipt of social protection payments.  With effect from March 2018 (with arrears paid at the start of 2019), people who reached pension age from 1 September 2012 will be offered the option of transferring to a TCA model, and following a consultation in 2018, a TCA model will be proposed for all new pensioners from 2020.


As with the model being offered on a transitional basis to post-2012 pensioners, the model from 2020 is expected to prioritise those who up to now were impacted upon by anomalies in the ‘Yearly Average’ system in place since 1961, and whose home-caring prior to 1994 has not been recognised until now.  For those with very few contributions who are not favoured by the new system, there will remain a non-contributory pension.


Outlining the need for the new Automatic Enrolment system to support those without retirement savings to supplement their State pension, Minister Doherty said:

“It is increasingly evident that most Irish workers are not saving enough, or indeed at all, for their retirement years.  Many people will be faced with a serious reduction in their living standards when they retire – a fall in income they clearly do not want. Having examined the options and looked at international experience, the Government has decided that a new Automatic Enrolment supplementary retirement savings system, where the individual retains the freedom to opt-out, is the best approach to take.  When introducing this system, we will ensure that those on low to middle incomes receive financial support from both the Government and their employer”.


The Minister added:

“While it is intended to begin enrolling employees in the new system from 2022, we are announcing our commitment today because we strongly believe that our strategic and long-term policies must be conveyed to all, to provide a clear statement of our intent and direction for the future”. 


Minister Doherty confirmed that following publication of the Roadmap, separate national public consultation processes will be undertaken for the Total Contributions Approach and the Automatic Enrolment Retirement Savings System (in Q2 2018).  The Minister confirmed that “feedback received from private citizens and representative groups will be used to inform Government in determining the detailed framework for the Total Contributions Approach and the preferred operational structure and design for the automatic enrolment system.”


In welcoming these reforms the Minister for Finance and Public Expenditure & Reform Pascal Donohoe T.D. said:  

This Roadmap represents a comprehensive approach to reforming pension provision in Ireland. It confirms the standing of the State pension as the bedrock of the pension system and lays out a set of actions to both increase supplementary pension coverage and increase the amount set aside for pensions in a transparent and structured way.  All sectors of society have an interest in securing adequate income in retirement for our people, and the introduction of auto-enrolment will help to achieve this. Pension reform will also help to underpin long-term economic and fiscal sustainability.


In the context of Public Service Pension Reform the Minister added the measures now providing for the significant increase in pension contributions by public servants and the increase in the maximum retirement age to 70, will both serve to support the future long term sustainability of public service pension benefits.”


The Roadmap will provide for fundamental reform of our pension system though the following 6 strands


  1. Strand 1 Reform of the State Pension including the Total Contributions Approach
  2. Strand 2 A New Automatic Enrolment Retirement Savings System
  3. Strand 3 – Improving Governance and Regulation including the EU IORPS II Directive
  4. Strand 4 – Measures to Support Defined Benefit Scheme Sustainability
  5. Strand 5 – Public Service Pension Reform
  6. Strand 6 – Supporting Fuller Working Lives


Further details of measures contained in the Roadmap for Pensions Reform 2018-2023 are available below.   


The full “Roadmap for Pensions Reform 2018-2023’ report is available to download on


Background Briefing:


Key elements of the Roadmap for Pensions Reform 2018-2023



Strand 1 – Reform of the State Pension including the Total Contributions Approach

The role of the State pension is to ensure that our citizens have access to a pension payment that provides a basic level of income adequacy in retirement. In this way the State pension provides a bulwark against poverty for older people.  In addition, the confidence that existing workers have in the future availability of a State pension enables them to make informed choices about their own personal/supplementary pension provision.


There are two strands to the State pension system.  – A contributory pension for those people who have a record of paying social insurance contributions and a ‘safety-net’ of a non-contributory or means-tested pension. The non-contributory pension is available to people who do not have sufficient social insurance contributions to qualify for the contributory pension but who do not have other means of income to sustain them during their retirement years.


To ensure that the State pension system continues to play its role in providing a core or adequate level of income, the Government intends to implement a number of reforms.


First, the Government will introduce, from 2020,  a ‘Total Contributions Approach’ (TCA) for the State Pension (Contributory).  The TCA approach provides a more logical and transparent system, where the pension paid to an individual will more accurately reflect the number of contributions paid.  It is intended that a TCA design proposal will be published for public consultation in Q2 2018 with the TCA design being finalised in Q4 2018 for enactment in Q1 2019 and to take effect from 2020. 



Second it is proposed to maintain the value of the State pension (Contributory) payments at a level of 34% of average earnings.  Towards this end, it is intended to bring forward proposals to link future increases in State pension payments to changes in the consumer price index and/or average wages. 


Third, there will be no further increase in State pension age before 2035 (beyond the increase to 67 and 2021 and 68 in 2028 already legislated for) and any future changes in the State pension age after 2035 will be linked to increases in life expectancy. 


Fourth, in order to ensure that changes to pension payments are balanced with changes to how pensions are funded, the Government intends to publish a consultation paper during 2018 on an appropriate approach to funding the social insurance system. 



Strand 2 – A New Automatic Enrolment Retirement Savings System

To address Ireland’s significant retirement savings gap, a new retirement savings system will be introduced to encourage employees to provide for additional retirement income to supplement the State pension.  The Government will introduce, by 2022, a State sponsored supplementary employment related retirement savings system in which workers will be automatically enrolled.  It is intended that employee savings in this scheme will be supported by employer and State contributions.  Under the system, workers will have the freedom to opt-out should they so choose, however experience in other countries indicates that once automatically enrolled workers tend to remain in the system.  It is hoped that the same experience will be repeated in Ireland.


Strand 3 – Improving Governance and Regulation including the EU IORPS II Directive

Reforms under this strand will tackle shortcomings in the existing supplementary private pension system in order to establish, for the long term, a more coherent and improved environment for pension provision in Ireland.  This entails delivering on Ireland’s obligations to transpose (by January 2019) the provisions of EU IORPS II Directive 2016/2341.  This will entail the introduction of measures to provide for greater economies of scale in our pension provision along with improved pension scheme governance and trustee standards, an enhanced regulatory framework and rationalisation in the range of pension vehicles.


Key responsibility for delivering on many of the actions contained within this strand will be shared between the Department of Finance, Department of Public Expenditure and Reform and the Department of Employment Affairs & Social Protection via an Interdepartmental Pensions Reform and Taxation Group.


Strand 4 – Measures to Support Defined Benefit Scheme Sustainability

Reforms under this strand have the objective of ensuring, insofar as it is practicable to do so, that the rights and legitimate expectations of Defined Benefit scheme pensioners and members will be protected while also protecting the solvency of the sponsoring employer and the employment of existing workers. This includes advancing the Social Welfare, Pensions and Civil Registration Bill 2017 the provisions of which will be aimed at improving the sustainability of existing Defined Benefit schemes.


Strand 5 – Public Service Pension Reform

These measures will build on a significant suite of actions already taken to ensure the sustainability of public service pension liabilities whilst safeguarding the delivery of retirement benefits promised.  It also includes providing greater flexibility in the retirement decision of public servants who may wish to extend their working lives.  This includes work being undertaken by the Department of Public Expenditure & Reform to provide employees in the public service, whose compulsory retirement age is currently 65, with the option to remain employed beyond that age.  Also included is the introduction of a new permanent additional superannuation contribution (ASC) which is an additional pension contribution by public servants over and above their standard contribution rates to this point. 


Strand 6 – Supporting Fuller Working Lives

The objective of reforms under this strand will be to challenge perceptions around retirement age and to support a positive ageing environment where older people are, to the greatest extent possible, encouraged and provided with greater flexibility to work to, and beyond, what is considered normal retirement, should they so wish.


This includes providing individuals with the capacity to defer receipt of the State Pension (Contributory) on an annual basis.  In return, an actuarial adjustment will be applied to increase the rate they receive when the pension entitlement is drawn down.  


Also included is confirmation of the Workplace Relations Commission’s recent publication of an employer/employee ‘Code of Practice on Longer Working’, a potential future review of mandatory retirement age provisions and practices to provide greater flexibility in the retirement decision and a review/consolidation of pension drawdown rules.