Heather Humphreys, the Minister for Social Protection, managed to gain Cabinet approval on Wednesday for a proposed bill which will make way for a substantial automatic enrolment (AE) pensions scheme. Despite the original launch deadline being shifted to early 2025, the Automatic Enrolment Retirement Savings System Bill is set to commence its journey through the Irish legislature after Easter. The Minister initially planned for the draft legislation to be published in the summer, but this has now been rescheduled to a future date within 2023.
Nevertheless, those within the pension sector continue to doubt whether the AE scheme will be operational by the beginning of the following year. The scheme, which was first suggested by former government minister Seamus Brennan in 2006, is intended to cover approximately 750,000 labourers across the country without occupational or private pensions.
“There has been a date proposed by the government for the scheme to commence, which is an improvement from its previous suggestion of the second half of this year, but it remains uncertain if this deadline will be met,” said Jerry Moriarty, the CEO of the Irish Association of Pension Funds.
In addition to advocating for the enabling legislation, the Social Protection Department has yet to appoint an organisation to create and administer the AE system, construct a National Automatic Enrolment Retirement Savings Authority for handling it, or initiate the formal procedure to identify the investment agencies that will manage the underlying investments.
Hillary Larkin, the head of outsourcing at Mazars, stated, “The scheme’s execution date of January 1, 2025, seems quite hopeful, considering the need to establish proper infrastructure for its operation.” Ms Larkin highlighted that a “comprehensive communication strategy” will have to be implemented by the government for employers prior to the plan’s execution. “The effectiveness of the programme will rely on meticulous preparation and a readiness to adjust based on feedback and varying requirements,” she added.
The process of locating a business to establish and manage the AE system is the most progressed. Sources revealed that Tata Consultancy Services (TCS), an Indian IT firm that manages a UK AE system established over ten years ago, and US professional services company Accenture are among the contenders for the substantial 10-year contract, expected to be worth approximately €150 million.
Industry insiders have suggested that Smart Pension, a UK-based firm specialising in pensions and retirement technology, may be making a bid. They operate under the Smart brand beyond their domestic market. As per the most recent data from the Central Statistics Office, about two-thirds of employees aged 20 to 69 have some sort of pension plan beyond the state-provided retirement income. Nevertheless, excluding the public sector, these numbers drop dramatically to approximately 33%.
In accordance with the auto-enrolment strategy, both employers and their workers will initially contribute 1.5% of the employee’s gross salary to the plan. This amount is set to escalate to 3% starting from the scheme’s fourth year, regardless of when a participant enrolls, increasing further to 4.5% in the seventh year and 6% from the tenth year onwards.
Under this scheme, for every £3 contributed by an employee, the employer would match it, and the state would add an extra £1, effectively creating a 25% contribution.