Mr. Tim Duggan:

I will try to take the Deputy's questions in the order he asked them, starting with the pay-related pension and the state-based approach in other countries. We have examined systems in other countries – in fact, I have gone to Sweden and Denmark and spoken to all of the experts there – in designing this system. Based on last week's debate and some of the questions raised, I believe there is a little misunderstanding about exactly what happens in those countries. Just as there is in Ireland and every other OECD country, there is a three-tiered pension system in Scandinavia and the wider Nordic countries. They have state pensions, occupational pensions and private pensions. How those pensions are comprised varies a little, but the structure is exactly the same.

The Scandinavian countries typically have two parts to their state pensions. They have a basic part to which everyone is entitled and could be represented by the non-contributory pension in Ireland. They have also a contributory part. Someone gets X and then gets more depending on the contributions he or she had made. It is pay related in that sense. This combination brings him or her to approximately the same type of income as a person on a contributory pension in Ireland would be on or, in some cases, less.

The state pension system in Scandinavian countries does not cover everything, which is why they have an incredibly strong occupational pension pillar. It is compulsory in those countries in the main and was arrived at through the collective bargaining approaches that were employed there for many decades. Most companies are part of that collective bargaining approach, which is agreed centrally with governments, have established occupational pensions either individually or, more likely, on a sectoral basis. There are mandatory levels of contribution that have to be made into these pension schemes by the employers and the employees.

In this respect, the Scandinavian system is not dissimilar to what we are suggesting with an auto-enrolment system. In all of the cases we examined, occupational arrangements, particularly on a sectoral level, were done through a central processing entity. That entity would effectively do what we are discussing in this context. It would arrange for the collection of the contributions and for the compliance of same to be upheld. It would arrange for the money to be invested in accordance with its standards and rules. It would provide the participants with access to the details of all of that through portals and so on. The approach taken in those occupational pensions is very similar to what we are suggesting.

Those countries also have private pensions in exactly the same way we do. People can avail of them in addition to or instead of occupational ones, if they wish. Self-employed people in Scandinavian countries tend to use private pensions rather than occupational ones a great deal.

All of the world's major think tanks, including the OECD, the International Monetary Fund, IMF, and the World Bank, advocate for a three-tiered system of state provision, occupational provision and private provision. We have all of that. It is just that many people in Ireland have not had access to the occupational piece for decades. The voluntary approach we have taken has not worked. Some good companies have set up schemes and brought their employees into them, but Ireland is very dependent on small, medium and even micro-sized enterprises, and such organisations typically have not set up schemes. That is why so few people in the private sector are in occupational schemes. The situation is entirely different in Scandinavia, where occupational schemes are the law, as established through collective bargaining. From my investigations, this is the main difference.

A final point to make is that the way Scandinavian countries have developed occupational schemes – the centralised management approach they have taken – has allowed them to achieve fee and charge rates of 0.5% or less. This is another reason for us to be confident that we can achieve the same.

Regarding investment, I will revert to what I told Deputy Ó Cathasaigh. The paramount obligation on the CPA in overseeing investments is its fiduciary duty to the participants. That is European law. We can set standards and include ESG principles in those standards, but there is a fine line to be walked between doing that and tying the hands of the CPA's board in conducting its fiduciary duty. It is not that it cannot be done. It just needs to be done with care.

We are acutely aware that ESG funds are becoming more important and are performing much better than they used to. Investors are taking them more seriously. In some respects, they are developing cachet status and becoming desired. As such, we are not greatly concerned that it will not be possible to marry the fiduciary duty on the one hand with the desire for ensuring ethical investment on the other. It is possible to marry the two and achieve that.

The trick with the CPA will be to tell it in the law what to do but not necessarily how to do it in detail. The structure and nature of markets are ever changing. If we tied the CPA's hands too much, it would not have the nimbleness to move and ensure the best interests of the participants. That is always a consideration when dealing with the markets.

On tax relief versus top-up-----