A study funded by the Department of Agriculture, Food and the Marine (DAFM) has shown that private pension coverage in the farming community is “low”.
The study, titled ‘Sustainable Transition of the Rural Economy through Generational Renewal’ was launched today (Thursday, May 23) at Maynooth University by Minister of State at the DAFM, Martin Heydon.
The research, led by project leader Dr. Michael Hayden of Maynooth University, found that level of private pension coverage in the farming community is approximately 50%.
There are significant variations in the coverage depending on farm system with dairy and tillage farmers with 70% coverage and sheep and cattle farmers with 40%.
Reasons given for low private pension coverage levels include, lack of affordability, that they have not got around to setting up a pension, lack of trust in private pension providers, and reliance on other personal savings/assets to fund retirement.
Farmers without a private pension cite, the state pension, family support, continued farming, and private savings/assets as future sources of income after the age of 66.
Generational renewal challenges for farmers
The analysis conducted by Teagasc and Maynooth University, highlighted significant differences for farmers across Europe in the qualifying conditions for full contributory state pension, with the Irish system “potentially requiring one of the highest level of contributions, up to 40 years”.
The Irish pension system, by not having mandatory registration for spouses/civil partners and “prescribed relatives” working on farms, and by having a means testing system which imputes notional income to non cash generating assets, has created significant gaps in social welfare pension coverage within the farming community.
The findings suggest that Ireland “lags” in terms of its social security pension system, as it applies to farmers.
There is significant potential in Ireland to assist in the generational renewal challenge, the report found, but with regards to a collaborative farming approach, “financial concerns and concerns over uncertainties in the future” are seen as significant challenges that
contribute to a reluctance of farmers to engage in collaborative farming.
Increasing collaborative farming
This project recommended that policies to increase participation in collaborative farming could be developed.
This approach would specifically target economically viable farms systems and/or lower income farm systems which are not capable of supporting a family on its own.
It would achieved through co-operation with other more viable farms and/or other farm systems additional collaborative opportunities may arise.
Agricultural advisors who are involved in helping farmers with collaborative farming arrangements need to have an understanding of how they operate so that they can educate farmers in this regard.
Another recommendation from the report was that formalised farm partnership arrangements should be encouraged and incentivised, as within loosely formed “informal” collaborative farming arrangements, “no commitment to transfer farm assets to assist in generational renewal exists”.
Policy initiatives could be developed to financially incentivise farmers to engage in succession planning, which could include the consideration of forming formal collaborative farming arrangements such as partnerships and companies.
Pension recommendations
To close the gaps in social welfare pension coverage within the farming community in Ireland, the project found that policy change is required.
This should include:
- Young farmers (successors in waiting), who work on family farms, should be required to pay PRSI (Pay Related Social Insurance) from the time they begin to work so that their contribution history for state pension purposes will not be contingent on when they inherit and become farm owners;
- Likewise, spouses and civil partners working on family farms should be required to register for PRSI, to ensure they will have a social insurance contributions history independent of their spouse/civil partner and will not necessarily be reliant on the means test provisions for pension benefits;
- Transitional provisions are required to ensure those currently not adequately covered by the state system do not remain disadvantaged even if mandatory registration is introduced.
Lack of affordability may mean in any event that private pension coverage amongst the more financially vulnerable sections of the farming community will remain low. This exacerbates the requirement for a state pension system which is inclusive of all farmers.