Dr. Orlaigh Quinn:

I cannot agree with that figure. It does not make any sense to me.

I will tease through what an auto-enrolment system would look like but deal first with the Chair's last question about a State pension system for everybody. In effect, we have such a system at the €12,000 level. An argument has been made about simply increasing that and using it as the pension. It would mean the State taking on all the investment and longevity risk. It is also the case that we face demographic issues. At the moment there are approximately five workers for every pensioner. As one moves out 20 to 30 years, one moves to a situation where there will be fewer than two workers for every pensioner. It would simply be unaffordable. There will not be sufficient income coming in from workers to facilitate a higher State pension.

Looking at auto-enrolment, the purpose is that the first tier of one's pension would be State guaranteed but on top of that one will have a second tier whereby one contributes oneself and carries some of the investment risk. A mandatory system is one in which everyone goes into the pension scheme and has no choice about it. The contribution is set and they are in it for life. In effect, that is the PRSI system we have. Auto-enrolment would be different in that people would sign up and have their own private pensions in respect of which a contribution rate would be set. While they would be auto-enrolled, which would be the mandatory element, they would have an option to come back out. It might facilitate people who were trying to save for a house or were funding a child's education to come out of it. It is based on inertia. Once a person enters he or she will not tend to leave. It is a bit like the situation whereby people rarely change bank account or mortgage.

How many times do people change their mortgages? They tend to go into the pension system, forget they are in it and then begin to build up their pension pot.

There is a series of tough decisions in terms of protecting people so the vast majority of people in these type of systems tend to go for what they call the default fund. They do not make a choice so it is very important that this default fund is very safe and not very high risk. A series of questions arise. Who comes in first? Does one phase it in? Do employees come in first? Does one extend it to the self-employed? Would one extend it further? They are all operational decisions. Once a decision is made by government, there needs to be a huge implementation plan. It relates to investment decisions, the question of whether it is State-run or run by the private sector and how one guarantees a certain level of benefit. They are the big pieces.