Dáil Éireann Debate, Thursday - 25 April 2024
22. Deputy Catherine Connolly asked the Minister for Social Protection what value-for-money analysis has been carried out in relation to the different rates of participation in the proposed automatic enrolment pension scheme; the different rates of opt-outs; the different rates of suspension; and if she will make a statement on the matter. [18377/24]
View answerThe introduction of an automatic enrolment (AE) retirement savings system is a Programme for Government commitment and a key priority for me as Minister for Social Protection. Implementation of the AE system is well underway, with the Automatic Enrolment Retirement Savings System Bill 2024 now having completed Second Stage in the Dáil and a tender process to contract for administration services being well advanced. Enrolment of the first participants is expected to commence in January 2025. The Deputy will be familiar with the analysis contained within the Regulatory Impact Assessment that accompanied the General Scheme of the Bill when it was approved by Government in July 2022. This document sets out the main options available to Government and the policy justifications for each approach. That document describes how the now agreed design of AE is understood to be the best solution to the problem of low pension coverage and low pension adequacy, particularly among private sector workers.When AE launches, the number of workers who will meet the eligibility criteria is approximately 750,000-800,000. This is based on data provided by the Revenue Commissioners. AE has some unique features, but insofar as it is comparable to other quasi-mandatory pension schemes around the world, we can be confident that opt-out rates will be low. When conducting costings and financing estimates, my departmental officials typically assume a 90% adherence rate for AE participants. This is partly due to the UK comparator, which, as I understand it, has a current opt-out rate of 10.4%. Given that the AE scheme is a very attractive offering for participants, I expect that the opt-out rate will be even lower in Ireland.Under the final design principles of the AE system, the State will make a contribution to participant’s retirement savings funds at a rate of €1 for every €3 saved by the employee. In estimating the costs of this State contribution, and assuming that 90% of enrollees will remain enrolled in the scheme, the full year cost of the State top-up is estimated to be €138 million in 2025. By Year 10, when the full contribution rates are phased in, the full annual cost is estimated to be €760 million.While the cost of incentivising AE appears to be significant, it represents an investment in retirement savings in order to safeguard the standard of living of the retired population in the future. Accordingly, it is expected that the investment made now will be returned to the economy in higher levels of expenditure by retired people in the future.With regard to the costs associated with the operation of the National Automatic Enrolment Retirement Savings Authority, the intention is for the Authority to become self-financing from fees charged to the participants over 10 to 15 years following its establishment.I hope that this clarifies matters for the Deputy.
