Dr. David Begg:

I thank the committee for the opportunity to discuss the draft heads and general scheme of the automatic enrolment retirement savings system Bill. My colleagues have already been introduced so I will not do that again. I will briefly outline for the committee the role of the Pensions Authority.

The Pensions Authority is a statutory body set up under the Pensions Act of 1990. Its role is to supervise compliance with the requirements of the Act by trustees of occupational pension schemes and trust retirement annuity accounts, RACs; personal retirement saving account, PRSA, providers; registered administrators, RAs; and employers. We also investigate suspected breaches of the 1990 Act; conduct on-site inspections and compliance audits; instigate prosecutions and other sanctions where breaches of the Act are found to have occurred; provide policy advice and technical support to the work of the Minister and the Department of Social Protection; provide relevant information and guidance to the public and those involved with pensions; and deal with inquiries received from scheme members, trustees, employers, the pensions industry, the general public and, indeed, the media.

Turning to the matter of the automatic enrolment Bill, the Pensions Authority welcomes the publication of the general scheme of the Bill. The introduction of automatic enrolment in Ireland is a welcome step and the authority is very supportive of this particular Government policy. In welcoming automatic enrolment, it might be useful to stress to the committee that the Pensions Authority does not have a direct role in the development of this policy but the authority has given technical assistance to officials in the Department of Social Protection. Clearly, therefore, we will not be able to comment directly on the policy choices which have been made to date.

As committee members will be aware, pension provision in Ireland consists of three broad pillars: pillar 1 is the State pension; pillar 2 is occupational pensions provision; and pillar 3 is personal pensions and additional voluntary pension savings. This approach is similar to that in many countries with a multi-pillar approach to retirement savings being advocated by the OECD and the World Bank. The use of multi-pillar systems is a widely accepted model for pension system design and reform. Bodies such as the World Bank, the OECD and, indeed, the International Labour Organization, advocate a multi-pillar approach with each pillar complementing the others to reduce risk and improve total retirement income.

Currently in Ireland there is no obligation on employers to offer an occupational pension, although since 2003 employers are obliged to make a personal retirement savings account, PRSA, available for employees where there is no occupational pension provided, but there is still no obligation on an employer to actually contribute to a PRSA.

As a result of the voluntary nature of occupational pension provision, pension coverage in Ireland is quite low. In its latest publication, the Central Statistics Office estimates 56% of all workers have a workplace or private pension to supplement their State pension - 90% of public sector workers do - compared to just over one in three workers, or 35%, in the private sector. This low coverage will mean that many workers will face a significant drop in living standards in retirement. By far the greatest predictor of whether a worker will have a pension or not is if their employer offers one. Therefore, in our view, it is vitally important that the Government enacts this legislation and introduces automatic enrolment as soon as possible to ensure the pension coverage rate in Ireland increases. The international experience in most countries that have introduced automatic enrolment shows it can overcome the inertia of people not getting around starting a pension and leads to an increase in pension coverage.

The introduction of automatic enrolment will be a welcome and important part of the Irish pension system for the coming decades. It will help address the problems arising from the changing demographics facing Ireland where an increasingly greater proportion of our population will be over the age of 65.

Turning to the draft Bill, I note the draft heads provide that the authority will be appointed as the competent authority responsible for the prudential supervision of the central processing authority, CPA, pursuant to the provisions set out in Part II A of the Pensions Act 1990. We think this is a right and fitting thing to do and that the CPA, as envisioned by the draft legislation, will be treated like any other institute for occupational retirement provision, IORP, as it is called in the vernacular in the industry, and will be regulated as any other pension scheme will be. This will include matters like governance and disclosure to members and will mirror the responsibilities of pension scheme trustees set out in the Pensions Act. It is important that those people enrolled in the automatic enrolment system will have the same levels of protection afforded to members of other pension schemes.

I thank the Chair for the opportunity to appear before the committee. My colleagues and I are happy to assist committee members in their deliberations in any way we can by answering any questions or providing any further information requested.