The Irish Association of Pension Funds (IAPF) has urged the Department for Social Protection (DSP) to consult before bringing in new regulations on minimum contribution rates from occupational pension schemes.

It warned the DSP, which plans to legislate for the new rules in the coming weeks, that any regulations that “attempt to create a simplistic comparison between the two will be flawed”.

In a letter sent to the department, IAPF CEO, Joyce Brennan, said that going forward without “full and meaningful” consultation will create “significant disruption for occupational pensions”.

She stressed that such a move would “risk undermining decades of progress in improving retirement outcomes”.

A consultation is one of three recommendations made by Brennan, who also called for the avoidance of operational changes to the MyFutureFund deduction process.

She further recommended that there should be an assessment on whether the Pensions Authority’s planned scheme authorisation regime could be used as an effective mechanism to ensure pension schemes meet required standards.

The Irish government announced in November its plans to legislate for minimum contribution rates for occupational pension schemes, ahead of the launch of its state-run auto-enrolment (AE) scheme, which will have a contribution rate of 1.5 per cent for both the employer and employee when it first launches.

It follows concerns raised by the Department for Social Protection (DSP) in October, in which it said it had been made aware that some employers are incorrectly informing staff that, because of a change in legislation, they are now obliged to join an employer-sponsored pension scheme before the end of 2026.

Although the IAPF acknowledged the department’s concerns and motivation for implementing the proposed changes, Brennan cautioned that the state’s MyFutureFund and occupational pension schemes are very different.

“Direct comparisons are inappropriate because of key differences, including the application of tax relief, and design features that enhance member engagement and long-term outcomes,” she wrote.

This includes differences in matching employer contributions, options for members to take contribution breaks or flexible benefits arrangements, and tiered contribution rates that increase with age or service.

Within occupational pension defined benefit (DB) schemes, she stated that death in service benefits add further complexity because employer contributions cannot be assessed in the same way as contributions to MyFutureFund.

She also warned that within occupational schemes, employers cannot compel employees to contribute, meaning any minimum contribution could fall solely on the employer.

“Employers have invested heavily in their pension schemes to meet the high governance standards required under IORP II…. Rushed regulations risk destabilising this strong and well-regulated system,” she stated.

In particular, she said the association is concerned about operational changes to how MyFutureFund deducts contributions.

On this, she said that such changes could “result in unplanned and unbudgeted costs” for employers, particularly where members receive significant bonuses or variable pay concentrated in a single period.

“In these cases, the employer’s contribution, typically a percentage of salary, could fall short of the AE comparable for that month, creating unnecessary complexity and compliance risk,” she said.

Therefore, Brennan urged that the impact and quality of a pension scheme should not be assessed based on any single pay period.

In addition, she described an increase in the number of employees joining their workplace scheme as a “notable success” of AE.

However, she said that the DSP’s current planned approach would have “consequences that risk damaging the existing pensions landscape by discouraging employers from offering occupational pension schemes”.

In signing off the letter, she urged the DSP to take the association’s concerns into account and engage with stakeholders before proceeding.

“We would welcome the opportunity to meet with you to discuss our recommendations in detail,” she said.

This letter follows the IAPF’s ‘urgent’ meeting with the DSP when the policy was first announced.

European Pensions has contacted the DSP for a response but it is yet to reply.

---