The Devil will be in the Detail of the new Auto-Enrolment Scheme - Congress
22 Aug 2018
Speaking ahead of the launch of the consultation on the Government’s new retirement savings scheme into which workers will be automatically included, the Irish Congress of Trade Unions has confirmed it will accept the invitation to respond to the draft design of the auto-enrolment scheme.
Less than half (47 per cent) of all workers have an occupational or private pension to supplement their State pension - 90 per cent of public sector workers do, compared to one in three (35 per cent) of workers in the private sector.
Congress Social Policy Officer Dr Laura Bambrick has said: “Generous tax relief on pension savings has failed as an approach for encouraging low and middle income earners to save enough for their retirement. Added to this, employers are not legally required to establish or contribute to an occupational pension scheme, and fewer and fewer are doing so voluntarily.
“As the State pension is not earnings-related, workers without a workplace or private pension are at risk of a significant drop in their living standards in old age”.
In response, Government plans to follow international best practice for boosting second-tier pension coverage by legally requiring employers to automatically enrol all staff who meet certain age and earnings criteria and who are not already members of an occupational pension into a qualifying pension scheme, into which workers will contribute a proportion of their salary, that contribution will be matched by their employer and topped up by the State.
While Congress agrees in principle with a move to auto-enrolment, some of the key issues for Congress in the design and operational features of a fit-for-purpose auto-enrolment scheme are who will be covered by mandatory enrolment, opt out conditions, and the management of pension funds.
Government is proposing that self-employed workers will have an option to voluntarily opt in to the scheme. They will not be captured by mandatory enrolment.
Dr Bambrick said: “This a cause for concern for Congress. Aside from the low pension coverage among the self-employed and the growing numbers of self-employed people in the workforce, introducing a compulsory employer contribution to their employees’ retirement savings, will further increase the financial incentive for unscrupulous employers to use bogus self-employment arrangements.
“One simple solution is to, at the very least, extend mandatory enrolment requirements to self-employed workers with no employees, and who provide work or services exclusively to a single business, and to make that business liable for the employer contribution”.
Workers can choose to opt out of saving for their retirement following a minimum period of participation in the scheme, and contributions made by the worker during that period will be refunded.
Dr Bambrick said “Congress is calling for statutory penalties to protect workers from employers who might seek to pressure their staff to opt out and by so doing deny them the pension contributions they are entitled to.
“The international evidence shows opt out rates to be surprisingly low and Congress is committed to replicating that success.
“Individual trust in the management of their pension fund will be key to the success of auto-enrolment. The Irish public remain understandably weary of pension providers. To counter this, and to ensure that quality, low-cost pensions are available, there must be a State mandated provider, either a bespoke agency or an existing agency. This is a red line for Congress.”
Dr Laura Bambrick
Social Policy Officer
086 814 23 58