Mr. Tim Duggan:

There are always discussions with colleagues in the Department of Finance on a host of matters, this included. The Government decided it would do a top-up for auto-enrolment at the rate of 3:1 and leave the existing system intact. I do not accept the premise that people are losing out. The people who are going to auto-enrolment right now have nothing. They are getting no incentive for anything from anybody. They go into auto-enrolment and every €3 they put in will automatically become €7. They are not losing anything; they are gaining phenomenally. They are getting an incredible amount of what some commentators have called free money. That is what I mean when I say this approach is inordinately better than the SSIA approach that existed at or after the turn of the century.

It is important to note that 75% of the people we expect will be auto-enrolled are paying tax at a rate of either 20% or 0%. If we had applied a tax relief to the auto-enrolment system, the vast majority of people would either get the low rate of incentive or no incentive of any kind from the State. Close to 600,000 people will end up better off under the auto-enrolment system rather than the tax-relief system. That is why the approach has been chosen. It is far easier to understand and far better for the vast majority of people who will be in it.

I am aware that some commentators have said publicly, and probably state in submissions to the Deputy, that this is going to create all kinds of confusion and arbitrage, with people trying to switch from one system to the other, but I believe there is a lot of hyperbole in that. It is grossly overstated as an issue. The people in occupational schemes will stay in them and those in none will enter auto-enrolment. There will be occasions when people will move between the two, moving from one job with a scheme to another with none, thereby going into auto-enrolment. Then they may move back, and then they may have a choice as to whether to go into the scheme in the company in question or stay in auto-enrolment. There will be some considerations at a personal level but the vast majority of people will not have any confusion or arbitrage issues to deal with.

On the questions on erosion and the State pension keeping up with inflation, it very much depends on what you do when you get to retirement age. Once upon a time, people used to take out annuities. As the Deputy said, that involves a fixed amount and it does not change much, unless one buys an annuity that has an inflation factor built into it. Annuities have gone out of fashion in that they have become quite expensive, especially in this jurisdiction. They are more expensive here than in many other jurisdictions. Therefore, what people are doing increasingly, and almost exclusively at this stage, is maintaining investment. They are using approved retirement funds or the like to keep their money invested and then they draw it down as they need it. Since the money is invested, one hopes the amount will grow continuously, in the same way that economies and expenditure inflate. You would hope that that mechanism would allow the returns to keep pace with the inflation occurring in the economy generally. That has worked out reasonably well so far for 30-year and 40-year investments where the money stays invested. Therefore, one of the reasons we have not yet landed on what the drawdown mechanisms for auto-enrolment should be is that we want to see how that landscape emerges. It is not immediately needed over the next three to four years and therefore we want to see what emerges.

We believe the advent of automatic enrolment in the Irish marketplace will result in innovation in product offerings on the retirement side. We want to give that chance for the landscape to change and emerge.

On owning property and income needed if renting, I do not consider renting and taking out a pension, or buying a property, as exclusive.