Minister for Social Protection Heather Humphreys secured Cabinet approval on Wednesday for draft legislation that would pave the way for a landmark auto-enrolment (AE) pensions scheme – even though the launch date has drifted to the start of 2025.
The aim is that the Automatic Enrolment Retirement Savings System Bill will begin its passage through the Oireachtas after Easter. The Minister had originally aimed for publication of the draft legislation last summer, before subsequently revising it to a time before the end of 2023.
Still, pensions industry observers remain skeptical about the prospect of AE – aimed at capturing about 750,000 workers in the State without occupational or private pension plans – being up and running by the start of next year.
AE was first proposed in 2006 by then government minister Séamus Brennan.
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“While we welcome that the Government has put a start date out there, having previously said some time in the second half of this year, it’s still very debatable whether they will be able to meet the deadline,” said Jerry Moriarty, chief executive of the Irish Association of Pension Funds.
Aside from pushing through enabling legislation, the Department of Social Protection has yet to appoint a company to build and run the AE system, set up a National Automatic Enrolment Retirement Savings Authority to manage it, or start the official process of finding investment firms to be responsible for the underlying investments.
“At this stage, an implementation date of January 1st, 2025, seems very optimistic given the level of infrastructure that needs to be put in place in order for the scheme to be operational,” said Hilary Larkin, head of outsourcing at Mazars.
Ms Larkin said a “clear communication strategy” will need to be rolled out for employers by the Government before the scheme is operational. “The success of the scheme will depend on careful planning and a willingness to adapt based on feedback and evolving needs,” she added.
Work to find a company to build and run the AE system is the most advanced.
Sources said earlier this month that Indian IT company Tata Consultancy Services, which set up and runs a UK auto-enrolment system established more than a decade ago, and US professional services firm Accenture are among shortlisted parties vying for the key 10-year contract, which is estimated to be worth about €150 million.
UK pensions and retirement technology company Smart Pension, which trades under the Smart brand outside of its home market, has also been linked by industry sources to a bid.
The latest Central Statistics Office data shows two-thirds of workers aged between 20 and 69 have pension coverage of some form outside of the State retirement income. However, when public sector workers are stripped out, the figure slumps to about 33 per cent.
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 of the scheme, that will increase to 3 per cent – irrespective of when someone joins the scheme – 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. It amounts to an effective 25 per cent contribution.
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