It’s not the solution to the problem of an ageing workforce, but it could be a possible salve in the State’s efforts to cut the costs of providing for an ever-growing number of people aged over 65.
Yes, the much discussed, but little acted upon, tool of auto-enrolment could, as espoused by the Chartered Accountants Ireland in a recent document, help mitigate the growing iceberg that is the cost of funding the State pension as the population ages.
The problem is that it’s unlikely to do so any time soon.
Auto-enrolment, whereby employees are automatically enrolled into a pension scheme and receive contributions from both the State and their employer to help them save, was first mooted back in 2006. In short, it would take the burden off the State by making people save more for their retirement themselves. However, several reports and consultations later, the scheme looks no closer to being introduced.
A success in countries such as New Zealand, Australia and latterly the UK, the proposed Irish scheme would have had a Special Savings Incentive Account-style (SSIA) approach to savings, with a government incentive of €1 for every €3 saved, equal to tax relief at a rate of 25 per cent. That’s less than those who pay the top rate of tax enjoy, but more than the standard rate. Employers too would cough up, as would employees themselves.
But getting the scheme off the ground now looks increasingly difficult. The target market for auto-enrolment is younger, lower-paid workers, in sectors such as retail, hospitality or childcare, for example, who may not be part of a group pensions scheme. The very same sectors that have been annihilated by the pandemic. Adding an extra cost on these employers, and asking employees who have been living off the pandemic unemployment payment for the past year, to suddenly start paying into a retirement fund now looks fanciful at best.
Indeed the Government now seems to be singing this tune also; its latest take on auto-enrolment is that it will be “gradually” introduced, with a phased rollout, over a decade.
That means we could be looking at 2031 before a meaningful scheme is in place.
Far too late for many of those who could have benefited from it when it was first talked about.
