Brendan Burgess
Founder
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We don't know what is in it yet though.
Brendan
Brendan
Does this mean two approaches will operate in parallel?
1) The govt scheme
2) Every other scheme already in existence
Ergo, if you're in an occupational pension scheme, receiving 20%/40% relief, it's business as usual?
“We all know that people are living longer. While this is very positive, we also want people to be able to enjoy their retirement years with some financial security.
“However, for many people retirement seems a long way away and they think they have a lot of time before they need to think about a pension.
“Some people may be of the view that the process of putting aside a little each week to provide for their retirement years is something to be considered next year, or maybe even the year after next.
“However, that is not the case. If people want to retain a reasonable standard of living in retirement, they need to start saving as soon as possible.
“This major reform in the Irish pensions landscape is intended not just to get people saving earlier but to support them in that saving process by simplifying the pension choices and importantly by providing for significant employer and State contributions as well.
“What we are doing today is putting in place a system whereby people can save for their retirement.”
“Automatic Enrolment has been part of the national conversation on pensions for some 25 years or more.
“In 2014, the OECD identified Auto Enrolment as a key pensions reform to be implemented. In 2017 87% of the members of the Citizen’s Assembly recommended that the Government should introduce a form of mandatory pension scheme to supplement the State pension.
“The Government listened and in 2018 we published a ‘strawman’ model for consultation. Based on the responses received there is a clear consensus, that an Automatic Enrolment system is needed.
“In addition, we engaged with national and international experts to learn about best practice, and this is reflected in the final design.
“There has also been considerable engagement with industry bodies, employer and employee representatives, advocacy groups, as well as members of the public.
The Minister added:“The design principles agreed by Government today, which will now form the basis for drafting the necessary legislation and putting the necessary operations in place, reflect the feedback received.”
“During the consultation process we received feedback that we should simplify the pensions savings choice proposed in the strawman, under which savers would be asked to choose from 12 different funds, and instead to provide for a pooled approach to savings and returns.
“We also received feedback that it would take time for workers and employers to adjust to the new system and that the phasing-in period for making contributions should be extended.
“We have responded to this feedback.
“Under the final design savers can choose from one of four types of fund; all contributions to that fund and all returns from that fund will be pooled. This means that although we will allocate contributions across different investment managers each person who chooses a particular fund type will receive the same return as every other person opting for the same fund-type.
“We have also changed the phasing-in period so that rather than increasing by 1% every year, contributions will increase by 1.5% every three years to ultimately reach the maximum level of 6% at year 10.
Details of the design of the Automatic Enrolment Retirement Savings System are being published today at www.gov.ie/AutoEnrolment.“These changes have improved the design and will make it easier for both employers and employees to understand and to participate in the system.”
“There is much to be done, with legislation required to set up the system on a statutory footing, the Central Processing Authority to be established to operate the system, and a communications campaign to ensure people understand it. It is an ambitious timeline, but one that is achievable.
“I am extremely proud to introduce this once in a generation policy that will have a truly meaningful impact on people’s lives.
“When implemented, the new Auto Enrolment system will enable employees to accumulate enough resources to maintain high personal living standards in their retirement.
Ends“In this way, Auto Enrolment will significantly increase the wellbeing, financial security and independence of our future retirees. Retirement should be a time when people can reap the rewards of a long working life and that is what Auto Enrolment will help to provide for generations to come.”
It sounds like existing private pension scheme arrangements are unaffected by this - the government website states "implementation of Auto Enrolment will commence immediately" and I haven't seen any announcement of changes to existing tax reliefs on employee pension contributions.
If so, it's a relief. I had feared that we'd have a de facto tax increase for individuals with existing private pensions.
One of the astonishing things at the public consultation was that the proposal was that the pension fund on retirement would not be taxable. If that is still the proposal, then it's way ahead of any private scheme.
I don't see any role for life companies in the AE scheme.Given it will take years for life companies to make money from auto enrollment schemes, I can't see them volunteering to pay for it.