The Government faces a “mammoth task” getting its landmark auto-enrolment (AE) pension scheme up and running by the end of next year, according to the head of insurance brokerage Aon Ireland, which runs the largest employee benefits consultancy in the State.
“With currently 750,000 workers in the country having no private pension, auto-enrolment is absolutely the right thing to do. But it’s going to be a huge uphill struggle to get it in place by the end of next year, in my personal view,” Aon Ireland chief executive Rachael Ingle told The Irish Times after the firm hosted a European investment conference in Dublin last week. “From where we are today, it feels like a mammoth task to make that happen in 2024.”
Under the planned scheme, which has been under discussion for at least 15 years, most workers will be signed up to a pension scheme by default, though they will be able to opt out.
While the timeline for the launch was recently pushed out to the second half of next year, Minister for Social Protection Heather Humphreys insisted at a Fine Gael think-in over the weekend that this deadline for the “transformative scheme” will be met.
The Minister said that she will be bringing forward draft legislation to set a central processing authority, to manage and administer the AE system on behalf of the participants, in the new Dáil session, which starts this week.
However, Ms Ingle said that key challenges faced by the Government include procuring underlying providers to operate the scheme as well as investment management organisations and funds.
“Procuring is a difficult process for Government entities at the best of times, but this is a significant one for them,” she said. “It is really important that they get it as right as they can from the beginning.”
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Ms Ingle said that a lot of work needs to take place to educate people on the importance of AE.
“There are a lot of people out there who have never put any money away for retirement and auto-enrolment is going to feel very painful for them,” she said. “But this is about your money, at the end of the day, for your retirement.”
Seven in 10 members of the public are not aware of the Government’s plan to introduce auto-enrolment, according to research published last month by Standard Life.
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 per annum.
Meanwhile, almost six in 10 Irish adults don’t know how much income they can expect to get from their pension in retirement, with men more likely than women to understand what their pension pot will deliver, according to a new survey published by Aviva Life & Pensions Ireland.
[ Auto-enrolment pensions scheme ‘on track’Opens in new window ]
[ Pension auto-enrolment: Most people still in darkOpens in new window ]
Despite the poor understanding held by so many of the income they can expect in retirement, some 44 per cent of the 1,000 people surveyed hope to travel a lot when they finish work, while 28 per cent say they want to relax and “do as little as possible”, according to the survey.
Less than one in 10 believe they won’t be able to afford to retire, it said.
“So many people have little or no understanding of the income they can expect in retirement. Without an appreciation of what you can reasonably expect to achieve through your pension contributions, it’s very difficult to realistically plan for the future,” said Eoin Kennedy, head of product and marketing at Aviva Life and Pension.
“Retirement itself needs to be funded, even aside from the travelling abroad that most people have in their sights. The day-to-day cost of living can really add up, particularly when you have no other source of income. While it is great that people are saving something into a private pension, it is important that they fully understand how adequate those savings will be for them in retirement.”
