Wednesday, 25 September 2019

Questions (11, 39)

Willie O'Dea


11. Deputy Willie O'Dea asked the Minister for Employment Affairs and Social Protection the status of her plans to introduce an auto-enrolment pension system; her views on whether quarter 3 of 2020 is a realistic timeframe for the implementation of the system; and if she will make a statement on the matter. [38834/19]

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Willie Penrose


39. Deputy Willie Penrose asked the Minister for Employment Affairs and Social Protection the status of her plans to introduce an auto-enrolment pension system; the status of the consultation process and research undertaken; and if she will make a statement on the matter. [38875/19]

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Oral answers (8 contributions) (Question to Employment)

First, I apologise as there is an error in Question No. 11. The reference to 2020 should be to 2022. Nevertheless, this is a critically important matter. As the Minister is aware, there is significant pressure on the State pension system due to demographic changes and longevity, among other issues. Only 35% of people in the private sector have their own private pensions. Auto enrolment is a partial solution to this problem. Naturally, we are very anxious that the Government would be in a position to proceed with auto enrolment as quickly as possible. I am concerned about some slippage in the Government's timetable that it set out in the pension document some years ago and I seek clarification on that.

I propose to take Questions Nos. 11 and 39 together.

I had assumed the Deputy had mixed up total contributions with automatic enrolment because the changes to total contributions is due in quarter 3 of 2020 and automatic enrolment is due in quarter 1 of 2022.

The Deputies will know from the CSO's latest figures for the third quarter of 2018 that the rate of supplementary pension coverage in Ireland is far too low at only 47% of the working population and that reduces to 35% when one takes out the public sector, which does not have any choice apparently. Therefore, if measures are not taken to address this issue, many future retirees will experience a massive cliff and a reduction in their living standards, which none of us want.

It is accepted that by international standards, a 2022 delivery for automatic enrolment is very ambitious given the level of design work to be done, the complexity of legislation that this House will have to pass and the organisational and procurement arrangements to be implemented. Nevertheless, given the low level of occupational pension coverage, the view of the Government, which I hope the Deputies share, is that an ambitious timeframe is appropriate and we will continue to work towards the 2022 commencement target.

Automatic enrolment will see a transition from the current and purely voluntary system to one which will, subject to certain parameters, automatically enrol employees into a quality-assured retirement savings system. The saver will maintain the freedom of choice to opt out.

An extensive national public consultation process on automatic enrolment finished earlier this year.  A Strawman Public Consultation Process for an Automatic Enrolment Retirement Savings System in Ireland was launched in August 2018 as the basis for the consultation. It set out a plausible approach to the design of an automatic enrolment system for Ireland, with the intention of generating discussion and, hopefully, improving the original ideas we had. I chaired a series of consultation seminars around the country, in Dublin, Galway and Cork. In March, my Department and the Pensions Authority held a series of focus groups with the target population intended for automatic enrolment. My officials continue to regularly meet various stakeholders and representative groupings, of which there are many, as the Deputies well know.

The Department has completed the analysis of the substantial material collated from the consultation process, in order to determine how the feedback received may assist with the design process. The ESRI has completed research we commissioned on the economic impacts of introducing automatic enrolment. My Department is continuing its research and consultation with experts from around the world to further build the evidence base in a number of specific areas over the coming months.  I recently updated the Cabinet committee on the economy on progress with the design of the automatic enrolment system, including an overview of findings from the consultation process and the ESRI's macroeconomic impact assessment. A report on all the progress to date on the matter will be brought to Government for consideration in the coming weeks to facilitate the next steps for implementation of the scheme in 2022, as planned.

The Minister stated earlier this year that during the consultation process, the proposals put forward by the Government in its roadmap document were "ripped to bits". The basic design was supposed to have been ready by quarter 1 of 2019. As the Minister is aware, that deadline has already passed. In view of that, is the Minister still confident that she will be able to bring in her legislation on target in 2022. As I have said, it is a matter of the greatest urgency.

I wish to tease out the issue a bit further. The Minister referred to complex legislation. Could she give some indication of the nature of that and the preparation that has been done for it? Could she also indicate if IT systems need to be developed?

Deputy O'Dea referred to the responses to the national consultation which the Minister carried out. Will there be widespread public information campaigns as well? While a certain number of people engaged in consultation, the public probably does not know very much at all about the issue.

Sometimes, I have an unfortunate turn of phrase that does not come out quite in the way I had expected. I am getting a reputation for it. I meant that in a good way. I referred to the number of people who came to us and said it was great but suggested we do this and tweak that. We got good feedback in response to the consultation, not just from the big insurance companies. A 16 year old boy came to Galway who was interested in his pension. I was blown away by the people who came to the open days and who gave their input. That is what I meant by ripping it to bits. They gave us some great ideas. I have said consistently in this House that no one party or Department has a monopoly on wisdom. What we want to do is deliver a service for the people that gives them exactly what they need, which is a few extra bob when they get to 66 to be able to do stuff they want to do in their retirement.

In response to Deputy Jan O'Sullivan, I hope the design will be finished in the main at the beginning of next year. The complexities around the central processing authority, CPA, will probably take us a little bit longer. There will be a requirement for a brand-new IT system. We do not know who is going to manage the system. There are still several things that remain to be designed. The roadmap for pension reform gives a clear indication of when we are going to do what we are going to do. There will be a public information campaign long before we ever press a button on day one, so as to socialise it and to make sure that people are happy. We have done a public consultation with employees and people within the industry in the past year and it has really yielded some positive changes to the system. I hope to be able to bring those changes to Cabinet in the coming weeks.

In terms of consultation, was there much discussion on who would administer the scheme? The Government's roadmap proposals suggest the private sector. A number of companies in the private sector are interested. I received strong representations to the effect that this should be done by a State body such as the NTMA.

The roadmap document promised the establishment of a full-time automatic enrolment programme management office that was to be established immediately. Has that been done?

The Minister referred to international experts. Are specific countries role models for what she plans to do?

One of the things we have not finalised yet is the management of the CPA. That has still to be determined. We are considering some of the suggestions that were made on how we look after that. I want whoever manages it to have the full confidence of both this House and the people who will give it their money. That is probably the most important thing for me to do.

The full-time management team is in my Department. It is not until it becomes a separate body and we determine who will be the ultimate manager of the CPA that a separate agency will be established. It may not end up being a separate agency; it may be a body that is already in existence. Those decisions will be made as per the timetable in the roadmap.

The international experts that we have are from the countries the Deputy can imagine they are from, who are world leaders in this area. It is just to try to help us. We could just copy and paste from somewhere else but it simply would not work. We want to learn from the experiences other countries have had. We have three international experts working with us to make sure that we get something that is suitable for us. There were some difficulties initially when the system was introduced in the UK and I want to make sure that we recognise them before they hit us in order that we plan for them and we can, hopefully, head them off at the pass.