Sir, – Colm Fagan’s excellent analysis of the draft heads of a Bill for a national auto-enrolment pension scheme (“Auto-enrolment pension plan seriously flawed”, Opinion & Analysis, January 4th) must be taken very seriously and acted upon immediately. He makes the very strong case for workers who retire from such schemes to have their accounts kept in the scheme, rather than be obliged to withdraw their savings at retirement and buy a life annuity or approved retirement fund (ARF) from a private-sector provider.
Colm Fagan demonstrates how this disadvantages workers financially. First, they lose the investment benefits of being in a large, well-structured scheme. Then, to make matters worse, because the cap on charges is being removed, as in the UK, “there will be no constraint on what private sector providers can charge”. He calculates that if retired workers could continue to benefit from remaining in the auto-enrolment scheme, this “would ensure more than 50 per cent better value to members, on average”. And he greatly regrets that by removing the cap on charges, “the Irish Government is following the UK’s lead” which, he says, “left private sector players with an open goal when workers’ pension pots mature”. All those who are concerned with improving the position of future pensioners in Ireland must take heed of the careful calculations and conclusions of this actuary – a past president of the Society of Actuaries in Ireland – and unite to ensure that our Government does not “go down the UK road” on this important issue. – Yours, etc,
ROSHEEN CALLENDER,
Blackrock, Co Dublin.
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Sir, – Your article on pension auto-enrolment didn’t go far enough in its review of the draft heads of the recent Bill. Colm Fagan is quite correct in urging the draft scheme to allow members to keep their accounts post-retirement as a way of reducing the inevitable fees and charges that the pension companies will apply. But the other major flaw in the proposed scheme is that the employers’ contributions of up to 6 per cent of pay will be subject to matching employees’ contributions. This will result in the hidden incentive for employers to discourage employees from continuing in the scheme, thereby reducing the employers’ payroll costs. The purpose of the auto-enrolment scheme is to grow and encourage the employee participation in an occupational pension scheme. But some employers will be tempted to downplay the benefits of the scheme, particularly when their short-term interests will be met by employees withdrawing their ongoing participation.
To make a level playing field for all employers, and to maintain the growth of an employee’s pension fund account, the employer’s contribution should not be subject to a matching employee contribution. – Yours, etc,
Cllr DAVE QUINN,
Social Democrats,
Dún Laoghaire Rathdown County Council.