Irish Life criticises new auto-enrolment pension plan and says it won’t help women

Given the larger gender gap in pensions, with women’s contributions sometimes up to 30pc behind, Irish Life has also criticised the fact that the new scheme will not allow female workers to make top-up payments to cover gaps in their policies.

The Government has now pushed back the starting dating for auto-enrolment to January 2025, having promised it would be introduced this year.

Social Protection Minister Heather Humphreys has just published the Automatic Enrolment Retirement Savings Systems Bill, which will shortly come before the Oireachtas. The aim is to bring about 800,000 workers into a pensions savings plan for the first time.

An estimated one in three private-sector workers have no pension, and will be reliant on state benefits when they retire. Automatic enrolment will put employees between the ages of 23 and 60 who earn over €20,000 a year into a workplace scheme which will be co-funded by their employer and the State.

At the beginning, every €3 put in by an employee will be matched by their employer with a €1 top-up by the State.

Oisin O’Shaughnessy, managing director of Irish Life Corporate Business, said auto enrolment is welcome but it is disappointing that employers who already have pension schemes will not be allowed to automatically enrol workers into them.

“This omission impacts employers by causing them unnecessary complexity, administration and material costs, where they are already providing retirement options for their employees,” Mr O’Shaughnessy said. “It will also result in the State having to invest in major ongoing communication and education programs with all of those schemes.”

This omission impacts employers by causing them unnecessary complexity, administration and material costs

Typically, not all employees are covered by occupational schemes, with seasonal workers and those who opt out or who have tenure restrictions tending to be outside. Firms say that while up to 95pc of their workforce may be in an occupational scheme, the remaining 5pc will now be in the State’s separate auto-enrolment set-up.

Adding to the complexity, these schemes are likely to have different contribution rates and tax reliefs. Companies such as Irish Life wanted the Bill to give them the option of auto-enrolling employees to existing occupational schemes rather than having to run two plans.

Women will have no mechanism to make up for any gaps in contributions

Mr O’Shaughnessy said that women will also be negatively affected by the Bill’s failure to allow employers and workers increase their pension contributions beyond a minimum level.

“This is counterproductive to incentivising savings. and will also widen the pension gender gap, as women will have no mechanism to make up for any gaps in contributions,” he said.

“Irish Life welcomes auto enrolment, but we strongly urge two key amendments to the Bill – to allow employers enrol members into their current pension schemes, rather than forcing them to incur unnecessary business cost from sustaining two pension systems, and to provide flexibility for women to increase their contributions.”

A new public body, the National Automatic Enrolment Retirement Savings Authority, is to be set up to administer the system.

From next year employees will pay 1.5pc of their gross earnings into a savings scheme, which will be matched by their employer and topped up by the State. The rates will increase every three years until employees are paying in 6pc, and the State 2pc, in 2034.

Workers can opt out or suspend their contributions after six months, but they will be brought back into the system again after two years unless they have made another pension arrangement.