Oireachtas Committee publishes report on Auto Enrolment

[TheJackal]

Pensions Reform

Pensions Reform Dáil Éireann Debate, Tuesday - 25 July 2023

www.oireachtas.ie

Tuesday, 25 July 2023

The Joint Oireachtas Committee on Social Protection has now published its report on the pre-legislative scrutiny of the Heads of Bill to establish the AE system, setting out 21 observations and recommendations. I am considering these recommendations in the drafting of the Bill, but would note that several of them are already incorporated in the design agreed by Government for implementation in a later phase once the system is bedded in. Other recommendations cannot be accommodated as they would require considerable change to the design already agreed by Government. The completion of the Committee’s scrutiny of the AE Heads of Bill nevertheless represents an important step in the legislative process.

Among the recommendations of the JOC are some relating to environmental concerns and the arms industry. In that context, it is important to state that the primary aim of investing AE participants’ funds is to provide a good financial return for them, so that they may have an adequate supplementary income that is over and above the level of the State Pension when they retire.

To manage and administer the AE system, a Central Processing Authority (CPA) will be established. It will procure, through the open financial services market, investment management services on behalf of AE participants. I want to make it clear to the Deputy that the CPA will not be administering a new State fund, but rather will be administering hundreds of thousands of individual savings accounts that are, and will remain, the personal property of the AE participants. The AE project is, in that sense, a State-incentivised personal savings scheme for individuals rather than a new national fund. In that context, the CPA and investment managers will have a duty to, first and foremost, get a good financial return for participants.

In designing high level investment strategies and in contracting for investment services, the Board of the CPA will be guided by both the prudent person principle as well as the need to ensure investments take account of environmental, social and governance (ESG) principles. Such principles would include taking pollution caused by fossil fuels and concerns relating to the arms industry into consideration as part of the overarching, long-term strategy.

It reads to me that most of the JOC recommendatons will be ignored

 

[TheJackal]

Pension Provisions

Pension Provisions Dáil Éireann Debate, Thursday - 13 July 2023

www.oireachtas.ie

I expect to be in a position to publish the AE Bill in the Autumn and to commence its passage through the Oireachtas immediately thereafter. Enactment of the AE Bill will then facilitate the AE system to start in the second half of 2024.

 

[TheJackal]

Am I reading into this too much or did the Irish Times read my links in the posts above. Article below is on front page on today's paper, based off the PQ reply issued July 25th which I referenced last week.

Start date for landmark pensions auto-enrolment scheme slips to late 2024

Initiative will see most workers being signed up to a pension scheme by default with option to opt out

www.irishtimes.com

They also attributed the quotes to her reply to Patrick Costello but it the quotes were from my other link, to Richard Bruton on July 13th.

Sloppy misquotes. Article does not mention when the PQs issued (or Richad Bruton at all) so as to not let the reader know the news is from mid to late July...

In a written response to a question from Green Party TD Patrick Costello, she said the legislation to underpin the establishment of the CPA is currently being drafted.

She expects to publish it in the autumn “and to commence its passage through the Oireachtas immediately thereafter”.

She said: “Enactment of the AE Bill will then facilitate the AE system to start in the second half of 2024.”

 

[Colm Fagan]

Hi @TheJackal
There isn't a hope of AE being introduced in 2024. Even 2025 is doubtful. Far too much has yet to be decided.
Firstly, Minister Humphreys has asked the Pensions Council to commission an independent evaluation of the proposal for a smoothed equity approach to AE, which I claim will halve the cost of an "adequate" pension. The Minister is unlikely to make any major decisions before that evaluation is completed - expected sometime in September.
Other vitally important aspects of AE are still outstanding.
One of the most important is the charge on members' accounts. The Draft Heads of Bill is silent - no indication of what the charge will be in all its 113 pages. DSP Officials said in the past that the charge would be a max of 0.5% of assets under management (AUM), but they've gone quiet recently. In a reply to a PQ on 11 May last, the Minister for Public Expenditure, NDP Delivery and Reform wrote that his Department must agree whatever charge DSP proposes. We haven't heard if those discussions have taken place and if so, their outcome. My suspicion is that DSP proposed 0.5% but DPER sent them back with a flea in their ear, saying that their scheme will cost far more than 0.5% a year to administer, probably closer to 1%. You need look no further than NEST in the UK to understand why. NEST had an accumulated deficit of over £800 million in March 2022. That's after more than ten years in existence. It has more than ten times as many members as the Irish scheme can ever hope to have. It charges around 0.5% of AUM on average. It doesn't project to break even until 2038. If it has trouble living within 0.5%, what hope does the Irish scheme have?
If you're interested, I say more about this and other outstanding aspects of government's proposals on the pensions tab of my website colmfagan.ie, particularly the document titled "Thoughts on Pensions Council's RFQ"

 

[NoRegretsCoyote]

This government had two big objectives on pensions: moving to TCA and autoenrollment. See the programme for government:

The Government will implement a Total Contributions approach, aiming to better match a person's contributory pension with the contributions they have made. This approach will also incorporate credited contributions, guaranteeing that individuals who take breaks from work to provide care for their loved ones are not put at a disadvantage.

[and]

The new Government plans to introduce a pension auto-enrolment system, taking into consideration the significant pressure currently faced by both employers and employees. The aim is to gradually implement an automatic enrolment scheme based on the following principles:

• Matching contributions will be made by both workers and employers, with additional contributions from the State.
• The rollout of worker contributions will occur in phases over a ten-year period.
• An opt-out provision will be available for those who choose not to participate.
• Workers will have a selection of retirement savings options to choose from.
• There will be a cap on charges imposed on pension providers.

Regardless of what you think, it's hard to think of a better backdrop for implementing big reforms like this. Ireland's population is still relatively young and the economy is running red hot with unemployment at its lowest rate ever.

It looks like neither objective will be legislated for in the lifespan of the government.