The Department of Social Protection plans to launch “towards the end of November” its official search for a company to build and run the system for its landmark auto-enrolment pension scheme, according to a Department spokesperson.
The awarding of the 10-year contract, which is valued at up to €150 million, will be a crucial milestone as Minister for Social Protection Heather Humphreys races to meet her target of having the scheme up and running in the second half of 2024, after years of starts and stops.
The Department has been engaging since at least the summer with companies looking to bid for the contract through a pre-qualification stage. The successful party will provide and operate the system on behalf of a planned new State organisation, called the Central Processing Authority (CPA), that will oversee auto-enrolment (AE).
Indian IT company Tata Consultancy Services (TCS), which set up and runs a UK auto-enrolment system established over a decade ago, London-based investment platforms specialist FNZ Group and Irish-American professional services firm Accenture are among parties planning to pitch for the contract, according to industry sources.
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The Department spokesperson declined to identify potential bidders, while representatives for TCS, FNA and Accenture either declined to comment or did not respond to The Irish Times.
The target of having auto-enrolment, which was first proposed in 2006 by then minister for social and family affairs Séamus Brennan, up and running within 12 months is viewed with a high degree of scepticism by pensions industry participants and businesses. It is expected that about 750,000 workers without occupational or private pension plans will be captured by the plan.
The systems contract, estimated by the Department in pre-qualification stage documents to be worth between €90 million and €150 million, is not expected to be awarded until early next year; an enabling Bill has yet to be published, though the aim is to have this done by the end of the year; and contracts for investment firms to manage the underlying assets of the auto-enrolment pot are not expected to be awarded until the second quarter of 2024.
Still, the Department spokesperson said: “Implementation of the agreed design is well under way and employers should prepare for the introduction of AE in the second half of 2024.”
[ Pensions auto-enrolment: The huge pensions shake-up that 70% of us don’t know about ]
Under the AE plan, workers and their employers will each initially pay 1.5 per cent of a person’s gross salary into the scheme. From year four, that will increase to 3 per cent, rising again to 4.5 per cent in year seven and 6 per cent from year 10.
For every €3 a worker pays in, their employer would pay the same and the State would top this up by €1. The proposal is that the scheme would apply to those aged between 23 and 60 earning at least €20,000 annually. The “soft mandatory” scheme will give participants various windows to opt out of the programme.
However, international evidence suggests that individuals tend to stick with AE pensions schemes after being pushed into them.
The UK system, known as Nest, only saw about 8 per cent of workers mopped up by the scheme in its first 10 years subsequently opt out, according to Nest’s latest annual report, which added that the rate “is much lower than predictions made before auto-enrolment started”.
Elsewhere, the New Zealand system has seen less than 18 per cent of people signed up to its AE plan subsequently opt out since it was launched in 2007.
