Mr. Brendan Kennedy:

Following on from what Dr. Begg said and in the context of the question as to whether we should follow the New Zealand model or a more centralised model, the point about the consolidation of Irish pensions is very relevant because the pensions sector here is in the process of changing.

If the approach was adopted of a light-touch structure that directed people into the pension sector as it currently is, you would be directing them into a sector that is in the process of change anyway. It is not quite a like-for-like comparison. It is appropriate that the overall approach here, as we have seen, is that the central processing authority being essentially treated like any other pension scheme is the most efficient way of doing it. We do not need to invent something new here but to ensure that in creating the central processing authority, that it is modelled on what is the best provision within pensions.

To answer the capacity and resources question and its effect on the Pensions Authority; from the authority’s point of view, there is not a significant resource or capacity issue created by the central processing authority. We have about 15 master trusts, which as Dr. Begg described are large schemes catering for many employers and, essentially, the central processing authority will be one more master trust. In time it will be the biggest and most important master trust but it will not create any new issues for the Pensions Authority which do not exist with any other master trust. There is a long road to go but I imagine that in staff terms, it may be two or three people, if one aggregates this across the authority. This is not at all significant for the Pensions Authority.

On the related issue of the likely cost of the charges levied on auto-enrolment and whether they are adequate to build a sustainable and robust system; if we look at comparisons within Ireland, one of the challenges is that because there are so many pension schemes in Ireland, getting reliable, representative data about such schemes is an enormous challenge. Work led by the Department of Social Protection in 2012 in particular, which looked at the typical cost of pension schemes, demonstrated an enormous range. The most efficiently-run pension schemes had the lowest charges of 0.5%. This percentage is certainly possible and practical.

The specifics, as further detail emerges in the final Bill, as to what exactly automatic enrolment will require will have an effect. It is definitely true that it will take time to build up the funds within the CPA for whoever is administering this, to the extent that capital is spent on creating the systems. There will be a need for a reasonably long payback period which, obviously, makes life more complex. Certainly, one can say that 0.5% does not look unreasonable.