Plans for the introduction of a compulsory workplace pension are to be put back again, according to weekend reports. The already much delayed auto-enrolment programme is to be delayed by at least another three months to the start of 2026 under a proposal being brought to Cabinet on Tuesday by the Minister for Social Protection, Dara Calleary.
In truth, the need for further delay can be news only to the Government – but the failure to deliver on yet another deadline will increase concern among stakeholders.
Auto-enrolment will see around 800,000 workers between the ages of 23 and 60 who are earning at least €20,000 but have no pension coverage except the State pension enrolled in what will be called My Future Fund.
They will be required initially to pay 1.5 per cent of their gross salary into the fund, a figure that will be matched by their employers. The State will also contribute €1 for every €3 invested by the worker.
Contributions will ramp up over the first decade of the scheme – to 3 per cent in year four, 4.5 per cent at the start of year seven and 6 per cent in year 10.
Businesses have repeatedly sought clarity from Government on when the new arrangements are coming into place to allow sufficient time to ensure their pay software and processes will accommodate the new arrangement. That has not happened.
Investment is required by businesses to get everything ready for auto-enrolment. At a time when they are already concerned about rising business costs and as they face the volatility of a potential global trade war, spending for something that may or may not happen for some time falls down the priority list.
Successive governments have dithered at various stages and then set unachievable targets, ignoring industry specialists who signalled clearly that more time would be required.
The department finally signed up Indian group Tata Consultancy Services last year to build and run the auto-enrolment system for the next 15 years at an estimated cost of €150 million – but only after several months of assessment and negotiation.
It was March when Minister Calleary started the search for investment managers to oversee what the Government expects to be €21 billion in assets – issuing a request for tenders just over six months before the intended “go live” date.
His department had committed to the National Automatic Enrolment Retirement Savings Authority (Nearsa), which will oversee the administration of the scheme, by the end of March. It is not yet in place.
There are technical and legislative challenges to bringing in such a scheme – though as similar arrangements exist in many other countries, there are templates available to work off, so such difficulties are not insurmountable.
The process has been characterised more by political manoeuvrings – by turn promises of progress and delays either as the scale of the work involved becomes evident or elections loom into view.
Put bluntly, no political party wants to tell voters they are going to take euros out of their pocket before an election – no matter how worthy the cause or how much it is to the long-term benefit of the voters themselves.
The good news is that following this latest delay, elections will not now be an issue. Oireachtas and European elections are behind us and the presidential election must be held later this year.
[ More than one in five Irish adults do not have a pensionOpens in new window ]
And there is some logic to beginning a new system like auto-enrolment at the start of a tax year. The question remains: will it actually be the start of the 2026 tax year?
While all this is going on, workers who are not members of an occupational pension scheme are missing out on the opportunity to better their financial position in retirement. And companies wait for final details on what they need to do, and by when.
It is long past time the Government got real on the timelines around auto-enrolment and the effort required to put it in place.
A glance at our neighbours in the UK is instructive: it took them more than five years to progress from establishing the overseeing authority to starting to enrol workers in their scheme.
Perhaps we can better that, but this is a major policy initiative affecting the future financial wellbeing of hundreds of thousands of workers. Getting it right from the start is important. Being realistic about what that entails and putting the necessary political willpower behind it is essential.
