Ireland's approach to retirement savings is undergoing a momentous overhaul, with the introduction of a €100 billion ($109 billion) sovereign wealth fund designed to support the country's state pension system and the long-awaited introduction of auto-enrollment in retirement plans.
One newfound source of income is from none other than tech monolith Apple. In September, a European Union court ruled that the firm’s tax beneficial arrangement with Ireland was in fact illegal under EU law. This verdict put a country of a little over five million people in line for a €14 billion tax windfall.
A possible destination for this fortune is Ireland’s sovereign wealth fund, known as the Future Ireland Fund, established in 2023 with an aim of reaching €100 billion in assets by 2035.
The SWF is off to a cautious, low-risk start. It is currently targeting a high-credit-quality portfolio of sovereign and quasi-sovereign bonds.
A second pot created alongside the wealth fund is a €14 billion climate fund opened by the Irish government, designed to invest in infrastructure projects that contribute to climate mitigation and adaptation.
“(The FIF) is much more long term in nature, set up to pay for the pension liabilities of state workers. It’s really an intergenerational gift from the state to the people of Ireland, promising that they are not to be on the hook for the state pension system,” said Ronan O’Riordan, head of U.K. institutional development at Schroders, an asset manager with AUM of $979 billion as of June 30.
Auto-enrollment
Twinning with the establishment of sovereign wealth funds is another key development for Irish savers: the introduction of auto-enrollment to retirement plans.
The auto-enrollment proposal has been in the works for decades, and has seen multiple delays, yet as it stands will be implemented in September.
Under current plans for auto-enrollment, Irish employees, employers, and the government all pay into the employee’s retirement savings. A new public body, the National Automatic Enrolment Retirement Savings Authority, will be set up to administer the model, which will apply to anyone earning more than €20,000 a year.
“Auto-enrollment will be a game-changer from a coverage perspective. There are 800,000 previously uncovered people who will be picked up in the new pension model and will finally have some form of retirement savings,” said Shane O’Farrell, director of workplace markets at Irish Life, an insurer which is active in Ireland’s pension risk transfer sector. This includes a €133 million bulk annuity onboarding transaction with Greencore, Dublin, completed in September 2023.
“The state pension system is under increasing pressure with an aging workforce, so this additional coverage is crucial to underpin the system going forward,” he continued.
There has also been a notable shift toward defined contribution plans in Ireland even prior to any introduction of auto-enrollment.
Data from the Central Statistics Office showed that only 26% of occupational pensions from current employment were in defined benefit plans in 2024, down from 30% in 2023. Defined contribution accounted for 69% of occupational retirement plans in 2024, up from 66% the previous year.
The latest data shows that the total assets of the Irish pension fund sector is worth €142 billion as of Dec. 31, up from €113 billion in Q1 2020.
Yet asset managers keen to get involved with this market have to show serious intent.
“Ireland has always been treated as an afterthought,” explains Chris Parker, head of DC solutions for the U.K. and Ireland at Man Group, an asset manager which had AUM of $169 billion as of Dec. 31.
“An interesting thing about the Irish market is if, as an asset manager, you go there once they don’t think you’re going to come back. So you go visit them again. Then after two or three years, you can build a pretty good relationship. In the Irish market, on the DB side there are probably some 10 to 20 plans of size that are worth addressing from an asset management standpoint,” he said.
Investment approaches
As with asset owners around the world, the investment strategies for DB and DC plans in Ireland are shaped by their respective risk profiles and objectives.
“DB schemes prioritize stability and liability matching, while DC schemes focus on growth potential and individual choices,” said Tony Dalwood, chief executive of U.K. alternatives firm Gresham House, which had assets under management of £8.8 billion ($11.4 billion), as of June 30.
“DB has fixed liabilities and therefore aims to match those liabilities. There is an increasing reliance on bonds, annuities, and infrastructure investments to manage long-term stability and to match these liabilities,” he said.
Even if the investment outlook is not particularly unusual, a detriment to doing business in the Irish institutional space has traditionally been its fragmentation. According to O’Riordan, until 2023 Ireland had “probably the most fragmented DC market in the whole world,” due to the sheer quantity of providers.
European legislation such as the Institutions For Occupational Retirement Provision (IORP) directive has had a significant impact on the national pensions space. Ireland is subject to these laws as a member of the European Union.
IORP sets common standards for occupational pensions and looks to protect participants, but has also increased the reporting burden for such plans.
In a speech in November, John Gethin, director of Ireland’s Pensions Authority, noted there to have been 12,500 separate group DC plans across the country in October 2024, and that as part of consolidation to deal with IORP II compliance that industry was looking to consolidate DC plans down to approximately 500. There were also 766 DB plans in Ireland in 2013, though as of the end of 2023 that number stood at 480.
According to O’Farrell, this legislation has been a motivating factor in the establishment of master trusts in Ireland (Irish Life itself operates the largest master trust in the country): “Compliance (with IORP) proved to be quite rigorous and resource intensive. As a result, it was not viable for many pension plans across Ireland. Master trusts present a strong solution for plans in this situation."
“The growth of master trusts has changed the face of the market quite considerably, driving widespread consolidation in a relatively short space of time; a trend which will likely continue over the next few years, if patterns in the U.K. are to be reflected here,” he said.
