Sir, – Dominic Coyle’s excellent article “Pension opt-out may disappear as firms look to sidestep auto-enrolment” (Business, November 15th) maps the likely contours of the post-auto-enrolment pensions landscape. Not a pretty sight.
The vast majority of employers will introduce a “cheap and cheerful” scheme for short-service and temporary workers who don’t qualify for membership of the main scheme. Employer contributions will be the minimum possible to avoid auto-enrolment (1.5 per cent of earnings in the first three years). High turnover rates for employees in these categories will exacerbate the problem of tiny leaver pension pots, already at worryingly high levels.
Membership of the auto-enrolment scheme will thus consist mainly of transient employees of small enterprises – low-paid because of the scheme’s tax disadvantages for higher earners. Thus, the Irish scheme’s experience will likely be similar to, possibly worse than, that of Nest (National Employment Savings Trust) in the UK, which is not surprising, given that it is modelled on Nest. Dropout rates will also be similar to Nest’s. Its annual dropout rate is 29 per cent, which implies that, if 800,000 join the scheme (as estimated by the Department of Social Protection), only 27,200 will still be contributing after 10 years. The other 772,800 will have fallen by the wayside.
Is that what we want as a nation? – Yours, etc,
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COLM FAGAN,
Past President,
Society of Actuaries in Ireland,
Bray,
Co Wicklow.