Minister for Social Protection Heather Humphreys vowed earlier this year that she’d sit in the Dáil and Seanad “day and night” to get legislation paving the way for a landmark auto-enrolment pensions scheme enacted.
She finally got it through both Houses of the Oireachtas on Wednesday – three months after it was initiated and, crucially, a little over a week before the Dáil summer recess kicks in.
“Automatic enrolment is about sending a clear message to our workers, and in particular to the young workers of today, that we want them to look forward to a secure financial future,” Humphreys said in the Dáil as the Bill passed the final stage before going to the President for signing.
“It has taken nearly 30 years to get this far,” she said of the plan, first mooted decades ago. “But we are here now.”
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Not quite. The official press release that her department put out afterwards failed to say when auto-enrolment – aimed at capturing 800,000 workers in the State between the ages of 23 and 60 that are earning more than €20,000 but not currently part of a pension plan – will officially launch.
When questioned by this newspaper, a spokeswoman responded that it “will become a reality in Ireland in early 2025″.
This time last year, Humphreys was saying the first workers would be enrolled in early 2024. By August, it had slipped to the second half of 2024. More recently, she had set a date of January 1st.
The new, vaguer target is as fanciful as every other one the Minister has set – and further undermines the credibility of the entire plan.
“The biggest issue is for employers who have to plan and budget for this. It is difficult to do that when there isn’t absolute clarity on the start date,” says Jerry Moriarty, chef executive of the Irish Association of Pension Funds. “There also needs be a very extensive communications campaign to ensure employers and employees understand it all.”
Shane O’Farrell, director of corporate partnerships with Irish Life, said employers need certainty on a timeline in order to budget and “most critically, communicate to their staff the existing pension options available to them – which are often far superior to the proposed auto-enrolment plan”.
A year after the Minister’s officials started a search for companies to build and manage the systems to run the mammoth scheme, they have only just picked a preferred bidder: Indian information technology company Tata Consultancy Services (TSC).
Fortunately, TCS has background in this space, having been the administration provider to the UK auto-enrolment system established 13 years ago, which currently services about 13 million participants.
[ SMEs not ready for auto-enrolment, accountancy chief warnsOpens in new window ]
Industry sources suggest it will take another 12 months at least – but more likely 18 months – to build the system, not helped by the fact that the real technical detail is missing from the Bill and the new agency that will oversee the whole thing, the National Automatic Enrolment Retirement Savings Authority (Nearsa), has yet to be established.
Officials in the department were signalling last autumn that they would start the search for four investment houses to manage the assets of participants in the scheme by the end of 2023 and that the successful bidders would be signed up in the second quarter of this year. The process hasn’t even begun.
Under the auto-enrolment 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 auto-enrolment scheme, as planned, has its issues – not least the fear that it will contribute to gender inequality. The €20,000 threshold will not take in many – more often women – in part-time roles. It will also not allow employees and employers to make top-up contributions to individuals’ pots to cover periods when people were out of the workforce. Again, this affects women disproportionately.
Furthermore, while the auto-enrolment system is being set up to technically come under the oversight of the State’s pensions watchdog, the legislation has been framed in a way that will force the Pensions Authority to apply a much lighter touch than imposed on the private pensions market.
[ Pensions industry challenges ‘benefit’ of auto-enrolment State contributionOpens in new window ]
Still, it is beyond time that auto-enrolment was introduced. Ireland is the only country in the Organisation for Economic Co-operation and Development (OECD) that does not yet operate an auto-enrolment or similar system as a means of promoting pension savings.
It’s looking increasingly unlikely, however, that it will be up and running within the lifetime of this government.
Ministers may be sticking doggedly to the line that the Government plans to run its full term out to early March – even after Minister for Finance Jack Chambers moved on Thursday to bring forward Budget 2025 by a week to October 1st.
The smart money doesn’t believe them. Bookmakers Paddy Power is now offering 2/7 odds of the country going to the polls later this year – equating to an almost 78 per cent probability.
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