The Department of Social Protection has selected Indian information technology company Tata Consultancy Services (TCS) as its preferred partner to build and run the system for its landmark auto-enrolment (AE) pension scheme, according to sources.
The awarding of the 10-year contract, which is valued at up to €150 million, is expected to be finalised within weeks.
This is a crucial milestone as Minister for Social Protection Heather Humphreys races to meet her target of having the scheme up and running at the start of next year, after years of starts and stops — even if there is growing doubt that the deadline will actually be met.
TCS set up and runs a UK auto-enrolment system established more than a decade ago. Founded in 1968, the company has had operations in Ireland for more than two decades and in 2020 opened a so-called global delivery centre in Letterkenny.
Planning regulator Niall Cussen: We can overcome the housing crisis, ‘if we put our minds to it’
On his return to Web Summit, the often outspoken chief executive Paddy Cosgrave is now an epitome of caution
Surviving a shake-up: is restructuring ever good for staff?
The Irish Times Business Person of the Month: Dalton Philips, Greencore
Officials at the department, which had been engaging since at least last summer with companies looking to bid for the contract, and a spokesman for TCS did not respond to questions from The Irish Times on the expected imminent appointment.
The target of having AE, which was first proposed in 2006 by then Fianna Fáil minister for social and family affairs Séamus Brennan, up and running by the start of next year is viewed with a high degree of scepticism by pensions industry participants and businesses. It is expected that about 750,000 workers without occupational or private pension plans will be captured by the plan.
Enabling legislation is going through the final stages of the Oireachtas. However, a State agency that will oversee AE has yet to be set up and the department still has not begun the formal search for asset management firms to manage the underlying investments.
Jack Chambers: what to expect from the youngest Minister for Finance since Michael Collins
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 annually. The “soft mandatory” scheme will give participants various windows to opt out of the programme.
However, international evidence suggests that individuals tend to stick with AE pensions schemes after being pushed into them.
About one in three private-sector workers have no pension and will rely on State benefits when they retire. Ireland is the only country in the OECD that does not yet operate AE or a similar system as a means of promoting pension savings.
Ms Humphreys’s department estimates that the cost to the State of the AE scheme will be about €138 million in 2025, its first planned year in operation. This is expected to grow to €760 million by the 10th year.
The calculation is based on the assumption that 90 per cent of workers who are automatically enrolled will stay in the scheme in the long term.
Sources previously told The Irish Times that TCS was vying with several parties for the key contract to build and run the AE system. These included US professional services firm Accenture and FNZ Group, a London-based investment platforms specialist.
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.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Join The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
