Ireland doesn't have a pension-coverage problem. Ireland has a pension-adequacy problem. So why has the government come up with a coverage solution which could get more people enrolled in pensions at the cost of lowering their contributions?

With a looming pension crisis that could match the scale of the banking crisis and a government close to bankruptcy, real pension leadership is required to empower trustees, employers and pension holders with the information and tools to enable them to properly prepare for the non-working years.

To date it would appear that the government has avoided any form of radical overhaul of complex pension structures, opting to simply overlay these with the flawed National Pension Framework, which some might describe as a long-fingered fudge.

The framework proposes the introduction of an auto-enrolment scheme. The objective of this is to increase occupational pension coverage, and while it may increase coverage marginally, it will almost certainly work against the principal goal laid out in the 2005 National Pensions review, that of adequacy – or in other words, increasing retirement savings. There is a significant risk too that it will drive down contribution rates in defined contribution occupational schemes, particularly in this difficult economic environment.

This comes at a time when private-sector pensions in Ireland suffered the worst investment performance in the world – losing over 33% of their value in 2008, with volatile returns since. We need to be increasing contributions, not reducing them.

The US has had a form of auto-enrolment since 2006. According to research released by the Centre for Retirement Research in Boston in 2009, American firms that opted for auto-enrolment make lower contributions than firms that opted out. They also concluded that employees made lower contributions, in line with their employers.

It is estimated about 15% of income is contributed to many private-sector pensions – comprising of employer and employee contributions. It is very likely that the introduction of the auto-enrolment initiative will see these contribution rates cut in half as the industry minimum of 8% becomes the industry norm.

The absolute cost of auto-enrolment and the likelihood of success is also a very important consideration, and one which appears to have been overlooked by the government, given that in the UK to date £280m has been spent on a similar scheme with no tangible results.

In a separate but related issue the cost of public-sector pensions has gone from €75bn in 2007 to €108bn in 2008 to €129bn in 2009 – that is a staggering jump of 73% in just two years.

According to the Pension Board's pensions calculator, a male aged 30 on a salary of €40,000 per annum would have to contribute 16% of his salary to fund a pension of two-thirds his salary at 65 (including the state pension, which he won't get until he's 68). The funding rate to provide a typical civil servant pension of €30,000 per annum would be closer to 30%. However under auto-enrolment, the total rate for the private-sector worker will be a minimum of 8%. As we know, minimums have a habit of becoming the norm. The public-sector worker's pension contribution will continue to ratchet up at an alarming rate. It's not difficult to conclude that recent private-sector pension initiatives are intended to offset the rising cost of your pensions. Will anyone other than public servants actually have enough to retire?

Ciaran Phelan is chief executive of the Irish Brokers Association