Dr. David Begg:

I thank the Deputy for her question. As she stated, we do not want to stray too much into the policy area but with that qualification, the first thing to say is that I do not see auto-enrolment as the panacea for all problems, if one likes, in the labour market. Some of those are really important difficulties, as the Deputy outlined. One of the ways we have to look at this is that the perfect could be the enemy of the good. It is important to get this thing rolling for reasons of the demographic shift that is taking place in Ireland. As we go on, changes can be made. There is a provision under head 59 for further changes to be introduced or further developments in terms of pensions products as we go along. We must remember that in practical terms it will be ten to 15 years before there is sufficient money in this fund to really make a difference for anybody.

The gender dimension is an important consideration. A certain amount of thinking has been done on this and it is encompassed in the academic literature. I can provide references to that if the Deputy is interested. In general, the gender pay gap in OECD countries is 28%. It is 26% in Ireland. Strangely, it is 34% in the United Kingdom. There has been suggestion that a lower entry point would be more helpful in trying to deal with the pensions gender gap but in the United Kingdom, the threshold figure is set at £10,000, as distinct from €20,000 in our case. If one looks at occupational pensions coverage for those at work, it is reasonably gender balanced, at approximately 57% men to 55% women. Part of the reason for that is there is a good concentration of women in the public service, for instance, who at one level may have better pensions than men working in the ICT industry, for example. At the lower end of the scale, there is a significant difficulty. If one uses the national minimum wage, which has just gone up to €11.30 an hour, as a criterion, that would be just over €23,000 a year. The threshold for auto-enrolment, at €20,000, is lower than that. In terms of the figures, there are 137,300 people in the State receiving the national minimum wage, of whom 75,900, or 55.3%, are female and 64,000, or 45%, are male. To that extent, one can see there is a greater concentration of women in some of the lower-paid employments. To a large extent, that has to do with part-time employment being a factor. An interesting paper published in October 2019 by Bercholz, Bergin and Tim Callan for the ESRI, stated:

With the €20,000 earnings threshold, our estimates suggest that about 57% of those auto-enrolled would be men. This arises because women with incomes above €20,000 have higher pension coverage than men – largely due to higher numbers of women in public sector jobs.

If the threshold were dropped to €14,000, that would adjust the numbers slightly, in that the percentage of men would go down to 52%. There is an effect there. The biggest difficulty is that when one gets into that region is that, although it is not being imposed given that there is an opt-out, it is very difficult for people at that level of remuneration to pay anything extra into a fund.

Another matter worth considering is that if the overall objective of auto-enrolment is to get a reasonably decent replacement rate for final salary in retirement, the State pension is much more important for people in that category. It may be that the difficulties the Deputy rightly points to could better be addressed by ensuring that women can qualify fully for the State pension. We have legacy difficulties in that area. As the Deputy is aware, since 1994 some provision has been made for people taking time out. One can get a 20-year allowance in the total contributions approach. Nevertheless, there are still legacy difficulties and, at a minimum, we could best deal with that issue by ensuring that every person on the low pay situation is at least captured by the State pension scheme. That would be a better policy remedy than trying to fit the auto-enrolment to try to deal with that problem.