Government draft proposals on Automatic Enrolment launched

Read the paper and it's alright for a first effort. A few points on it (copied & pasted from a blog I am writing on it for Monday)

  1. You have the option of opting out during the 7th & 8th month of membership. If you don't opt out then, there will be limited opportunities that weren't given when you can opt out again.
  2. If you opt out, you will be re-enrolled after 3 years and can opt out again during the 7th & 8th month (I agree with this because people who opt out once will most probably not rejoin unless prompted).
  3. If you opt out, you will receive a refund of the value of your contributions.
  4. The State and employer contributions will be used to pay for the CPA (I don't see why employers shouldn't get a refund of contributions too).
  5. They envisage that this will be in place by the end of 2022 (they have just rolled out their initial thoughts on this. It has to go through a consultation process and finalise the exact nature of the scheme. Then the IT infrastructure has to be built to run what will be a massive scheme. I can't see it being ready in just over 4 years).
  6. Duke raised very good points on who will provide advice on this?
  7. And the 0.5% charge is extremely low. The cost of the IT system for this will be massive. It will take a provider a long time to make money back on this e.g. €20,000 salary at 14% contribution = €2,800 * 0.5% = €14 a year?!! I know there will be compounding and scale but still.
  8. €75,000 cap. Are they going to reduce the current €115,000 cap to €75,000 or carry on with two different caps?
  9. Very vague on retirement options. Almost as if they got to the end of writing the paper, they were all tired and cranky, so they just through something down and said they'd do that later.
  10. Contributions cease at State pension age but they don't say whether you can access the fund if you stop working before then.
  11. If their aim is to reduce tax relief to 25%, where does that leave the self employed? Company directors can make much larger company contributions and claim tax relief against them. But the self employed are limited on how much they put in and only getting 25% relief will put them at a massive disadvantage in saving for retirement. And if you are in a profession, you are excluded from being a company.

Steven
www.bluewaterfp.ie
 
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Hi – Slightly confused by proposals, so looking for some insight.

I am a private sector employee in a DC scheme, both I and my employer make contributions as is.

Does this proposal mean both me and my private sector employer can start this second new scheme, and even if my employer doesn’t put anything into it, but I can and the government will put in one euro for every three euro? Or will private sector employers just ditch their schemes and go with this option?

If you are a DB Public Sector person, can you use this as AVC of sorts, and again even if my employer doesn’t put anything into it, but I can and the government will put in one euro for every three euro?

If you were a public sector person, significantly short of years, IE joined in 40’s, can this be used to effectively shore up gaps in years etc?

It appears this scheme will only be accessible from 68, what if you wish to retire early, ill-health, my understanding is my current DC private sector pension can be accessed from 50.
 
Duke of Marmalade said:
Also there should be no statutory cap on the fees. The service should cost what it costs. Pay peanuts you get orang utans.
Click to expand...

Well my Swiss orang utans do very well for me! The Swiss system not only limits fees and fee types, it requires funds managers to achieve a certain minimum return pa on average assets, restricts asset classes allocations etc and they still do fine. We have 94 pension fund management companies in Switzerland and I have yet to hear of one getting out of the business or indeed even complaining of the restrictions. Between 2007 and 2017, my fund had an annually return of between 5 - 7% after fees. During the period the minimum returned required by the government as between 3 - 4.5% of average assets.
 
world201812 said:
Hi – Slightly confused by proposals, so looking for some insight.

I am a private sector employee in a DC scheme, both I and my employer make contributions as is.

Does this proposal mean both me and my private sector employer can start this second new scheme, and even if my employer doesn’t put anything into it, but I can and the government will put in one euro for every three euro? Or will private sector employers just ditch their schemes and go with this option?

If you are a DB Public Sector person, can you use this as AVC of sorts, and again even if my employer doesn’t put anything into it, but I can and the government will put in one euro for every three euro?

If you were a public sector person, significantly short of years, IE joined in 40’s, can this be used to effectively shore up gaps in years etc?

It appears this scheme will only be accessible from 68, what if you wish to retire early, ill-health, my understanding is my current DC private sector pension can be accessed from 50.
Click to expand...

If it will be possible retain an existing arrangement in relation to current employment and set up an AE scheme to gain benefit of the state contribution what then happens at NRA? Under current rules all benefits relating to the same employment must be taken at the same time. In this instance are you then restricting access to you main/original scheme to state pension age?
 
I view the 40% tax relief as the main incentive for investing through a pension, compared with buying shares directly which is heavily taxed compared to other countries in terms of both dividends and capital gains.

Unless Ireland first introduce some tax efficient savings options along the lines of 401k/IRA/ISA, it is crazy to reduce the 40% tax relief. It is a disincentive to investing in your pension. As such, I would be taking a hard look at how much I invest in my pension. I'm sure I won't be the only one doing this and unfortunately a lot people will choose to reduce their contributions at the very time in life that they should be increasing them.
 
I work in IT infrastructure for a TPA, been involved in the setup and migration of large schemes. If they tender to an existing provider the setup would only take about six months from an IT perspective even configuration of documentation. The infrastructure spend would also not be as significant if leveraging the resources of an existing provider, no need to duplicate spending on cyber security etc.. Just stand up a new set of Web and app servers. The scheme itself would be pretty standard so reduced spend on product setup. Biggest spend would be on hiring and trading customer service staff.
 
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