State plans new opt-out pension
÷ Automatic enrolment ÷ Penalties for employers ÷ Opt-out option for limited period
WORKERS without a pension will be automatically enrolled in the State’s new pension plan, according to a draft outline of the scheme released yesterday.
Minister Regina Doherty says it will be in place by the end of 2022 and will apply to workers aged 23 to 60 who earn €20,000 or more, with an opt-out option after six months. It will also penalise employers who do not enrol employees.
Applies to those aged 23-60
Scheme in place by end of 2022
EMPLOYERS who don’t enrol staff in the State’s new pension programme will face a penalty, according to a draft plan unveiled by the Government.
Social Affairs Minister Regina Doherty revealed the plan for a system in which private-sector workers who do not have a pension will be automatically enrolled in a new pension scheme.
Workers can choose to opt out after six months. However, if they do, they will be automatically re-enrolled in the system after three years. Automatic enrolment will apply to those aged between 23 and 60 who earn €20,000 or more.
Ms Doherty insisted the scheme will be in place by the end of 2022. She could not say how much the IT system to operate the scheme will cost, but agreed ‘it is not going to be cheap’ as ‘this is going to be an enormous project’.
Hailing it as ‘perhaps the most fundamental policy reform in a generation in terms of retirement savings provision’, Ms Doherty said the aim is to improve ‘income adequacy for future retirees’.
The minister launched the public consultation process on the document which is a ‘strawman proposal’ meaning a draft outline of how the scheme will work designed to prompt and generate discussion and ideas to improve the scheme.
The Department of Social Protection says two-thirds of private-sector workers have no pension and are not saving for retirement, and ‘will see an unwanted drop in their living standards when they retire’.
It proposes that a new ‘Stateprovided Central Processing Authority will be responsible for contracting and licensing’ with up to four registered providers to provide retirement savings services.
Should workers opt out, they will be refunded the money they put in with a small ‘management fee’ deducted.
The proposal outlines that ‘failure of the employer to enrol, deduct and remit contributions as required will be subject to administrative penalty initially and to prosecution as a criminal offence if sustained’.
If employees don’t choose a provider to lodge their savings with, one will be automatically provided. Contributions will be collected at the payroll point and transferred to the appropriate registered providers.
The self-employed or those outside of the age and earning bands outlined will have the choice to opt in.
Contributions will be on a phased basis starting at 1% and increasing by 1% each year until it reaches 6%. Employers’ contributions will match the members’.
The proposal states that the State will ‘provide an incentive’, and it is suggested it contribute €1 for every €3 saved.
The administration charge outlined in the proposal stands at 0.5% a year of a member’s savings.
A ‘pot-follows-member’ approach is proposed so if you change jobs, your pension goes with you. Those earning over €75,000 can continue to contribute but their employer will not have to match contributions above that amount.
The plan will ‘not impact on the State pension’ which Ms Doherty said will remain the ‘bedrock of the Irish pension system’.
The Department reiterated its long-term commitment to maintain the State pension at 34% of average wages.
The public consultation period will close in early November.
Comment – Page 14 emmajane.hade@dailymail.ie