Dáil Éireann Debate, Wednesday - 28 June 2023
95. Deputy Jackie Cahill asked the Minister for Social Protection if she intends to ensure that the new fund being created through the auto-enrolment pensions scheme will not invest in fossil fuel companies; if she intends to enshrine this in law; and if she will make a statement on the matter. [31392/23]
View answer103. Deputy Michael Lowry asked the Minister for Social Protection if, regarding the proposed auto-enrolment scheme for pensions and the potential allocation of funds to investments in fossil fuel exploration or extraction, she will take into consideration the recommendation put forth by the Oireachtas Committee on Social Protection, Community Development and the Islands to ensure that these funds are not invested in fossil fuels (details supplied); and if she will make a statement on the matter. [31557/23]
View answerI propose to take Questions Nos. 95 and 103 together.
The introduction of a pensions auto-enrolment system is a Programme for Government commitment, and a key priority for me as Minister for Social Protection.
Last year, I published 'The Design Principles for Ireland’s Automatic Enrolment Retirement Savings System', which set out the new system in detail.
A dedicated project team in the Department of Social Protection is solely focused on implementing the agreed design, including by drafting the necessary legislation that will underpin it, designing the organisational structures and the technical system to operate it, and communicating this landmark reform to stakeholders and the public.
Several workstreams are being progressed in parallel, among which is the drafting of the AE Bill in conjunction with the Office of Parliamentary Counsel, which I expect to publish later this year.
The Joint Oireachtas Committee on Social Protection recently 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. 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 Deputies that the CPA will not be administering a new State fund, but rather will be administering hundreds of thousand 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 into consideration pollution caused by fossil fuels as part of the overarching, long-term strategy.
I hope this clarifies matters for the Deputies.
