Fresh doubts cast on plan for new pension system by 2024
PLANS to have autoenrolment pensions up and running by 2024 have been described as ‘somewhat ambitious’ by Department of Finance officials.
Under the plans, announced last year by Social Protection Minister Heather Humphreys, after ten years of employment, an employee will be putting aside 14% of their salary per annum, with no options to increase that figure or put in a top-up amount.
This will be made up of 6% of a person’s salary, a 6% contribution from an employer and 2% from the Government.
There will not be flexibility to contribute at other percentages of salary rates. Employees will initially be putting 3.5% in year one of the scheme, with that figure gradually increasing to the maximum of 14%.
The long-awaited move came with a commitment that the scheme would be up and running by 2024.
However, in a briefing note prepared for Michael McGrath when he became Finance Minister last month, officials described this timeline was ‘somewhat ambitious’.
The note said: ‘Government has approved the final design principles, with the Department of Social Protection working towards having a draft Bill ready for Q1 2023. The envisaged commencement of AE [autoenrolment] is 2024, which at this point seems somewhat ambitious given all that needs to be done.’
The Oireachtas Social Protection Committee is still taking hearings as part of the pre-legislative process.
This is where a minister publishes a draft Bill and the Oireachtas has a chance to make recommendations about how it could be improved before it formally enters the legislative process.
The note also flagged concerns from the Irish Association of Pension Funds (IAPF) and Insurance Ireland about the design, eligibility, coverage and rollout of auto-enrolment. IAPF chief executive Jerry Moriarty told the Irish Daily Mail he wasn’t ‘hugely surprised’ at the news that the plan may be pushed back again. ‘We thought the timescale was ambitious,’ he said.
The Government is set to establish what is known as a Central Processing Agency that will run the scheme, but it will not be able to establish a board, appoint a chief executive or set up and purchase the appropriate IT infrastructure to run the scheme until the Bill becomes law.
The Mail this week reported on concerns raised by Irish Life, which has said the existing structure of the scheme could entrench gender inequality in terms of how much men and women earn from their pensions.
While backing the introduction of auto-enrolment, Mr Moriarty also raised concerns about the plans, saying: ‘AE will not have a tax relief, it’s going to be a direct contribution to the State – that’s different to the existing system, and adds complications to the system.’ He also said the start age of the scheme, set to be 23, is too high and that people should enter the system whenever they get their first job.
A spokeswoman for the Department of Social Protection said that while the timeline for the delivery of the system is ambitious, it is still ‘achievable’. She said: ‘Implementation is well under way, with the first enrolments expected in 2024. Working towards that date, the Department of Social Protection has a dedicated project team progressing a significant work programme including drafting the necessary legislation, designing the organisational structure and technical system, and communicating this landmark reform to stakeholders and the public.’
She added: ‘The design of Ireland’s auto-enrolment system is research-based and takes into account international experience and best practice. The focus is now primarily on implementation and the working out of the detail underpinning the agreed design.’
‘We thought it was ambitious’
It is still ‘achievable’