The State’s new auto-enrolment pension scheme will be delivered in 2024 with the first enrolments expected by the end of this year, the Minister for Social Protection has pledged.
Heather Humphreys said she knows some employers are concerned about the cost of its introduction, but putting it off for another couple of years is “simply is not an option”.
The minister said companies which have been through the pre-qualification process and have been shortlisted for the contract to run the pensions administrative service for the scheme will be invited to submit tenders from tomorrow.
“That means we will have a provider in place in the coming months as we work towards the launch of the scheme itself later this year,” she told attendees at the National Pensions Summit in Dublin this morning.
“In addition, a procurement exercise for investment management services is at an advanced stage of development, with extensive market research being undertaken to inform the development of the ‘Request for Tender’ that will issue in the very near future,” she stated.
The minister added that the legislation required to underpin auto-enrolment will be published in March and begin its passage through the Oireachtas straight afterwards.
“And as I have told my officials, I will sit in the Dáil and Seanad day and night to get that Bill enacted as quickly as humanly possible,” the minister said.
Ms Humphreys described the plan as “transformative” for people and represents the biggest reform of our pension system in the history of the State.
She said the picture around supplementary pension coverage is stark, with just 56% of working people having one and just 35% in the private sector on its own.
“Auto Enrolment is crucial to reversing that long-standing and worrying trend of low pension coverage in Ireland,” she said.
The minister added that she understands that some employers have concerns about the introduction of the system.
“As a former Minister for Business, who talks to employers every week, I know that it is a challenging time for many small businesses right now,” she told attendees.
“Employers are facing pressures on a number of fronts – be it high inflation, a significant increase in the minimum wage, the introduction of Statutory Sick Pay and now the roll-out of Auto-Enrolment,” she said.
“But in truth, we have to weigh all this up against the fact that putting off the introduction of Auto-Enrolment for another few years just simply is not an option,” she added.
The Government has listened to the concerns of employers she stated, and contribution rates will be phased in over a decade, starting at 1.5% of gross pay for the first three years.
“Most employers will also be spared any real administrative burden because the Government has decided to set up a Central Processing Authority, which will undertake most of the administration of the new system,” she said.
“It is also considerably lower than the administrative burden that AE systems in other jurisdictions impose,” she noted.
“Therefore, the preparation required by employers is largely limited to appropriate budgeting and in this regard my advice to employers is to continue to presume AE will happen from the fourth quarter this year, and to budget accordingly,” she urged.
She also pointed out that auto-enrolment will not prevent employees who are enrolled in it from subsequently joining their employer’s scheme.
“I would therefore encourage employers to discuss retirement provision with their employees to ensure that the coverage provided through their employment, either through AE or an employer scheme, is suitable for their needs and circumstances,” she said.