Ms Moyagh Murdock:

As the Chairman has made the introductions, I will go straight to my presentation. Insurance Ireland is the representative body of the Irish insurance industry. We represent 133 members providing cover to more than 25 million customers in more than 110 countries. Our members employ approximately 28,000 people in Ireland and contribute €1.6 billion in tax income per year to the economy. Ireland is the fourth largest market for insurance in the EU and the biggest exporter of insurance services.

Insurance Ireland appreciates the engagement by the committee and its members with its initial submission on this issue in November 2022.

The general scheme of the Bill is a milestone in the joint efforts of all stakeholders to develop an automatic enrolment scheme for workers. Insurance Ireland and its members have supported the development of the system from the beginning and endeavoured to share experiences and learnings from decades of pension scheme provision. The objective of the automatic enrolment scheme is to increase an individual’s pension provision and support all members of society in achieving a good standard of living in retirement. To deliver on this objective, the scheme will need to be inclusive, flexible and future-proofed, as I will set out.

The future automatic enrolment regime needs to include those who need it most. The general scheme assumes a scope of people in formal employment between 23 and 65 years of age and with incomes of more than €20,000 annually. The limitation of access for people of younger age and with lower incomes exposes, in particular, more vulnerable households and individuals. Citizens starting their career immediately after school or college will miss out on important years of contributions and benefits for their retirement. Many reports have shown the benefits that the additional years of saving for retirement have over the lifetime of a pension. Such individuals might also be hit by the €20,000 income threshold, given lower formal qualifications often coincide with lower income levels. Notwithstanding an individual’s age, people with lower incomes in general, such as people working in the care sectors or hospitality, will be the second major group losing out on the scheme.

The third group of people who may be disadvantaged from the current provisions of the general scheme are people who work part time. This will impact especially on people caring for their loved ones such as family members and children, who are more often than not women. The gender pay and pension gap is already a substantial challenge for our society, well known at this point, and while automatic enrolment is not the answer to closing this gap, it should not be allowed to crystallise the issues by excluding the efforts women can take to close the gap for themselves, or indeed for their employers to help them do so. The scheme should support the efforts of women to ensure the adequacy of their pension in retirement and employers seeking to support these efforts. The lack of flexibility on top-ups, transfers or clarity on the State credit while the individual is on periods of maternity or carer's leave is concerning. A new pension regime that requires significant input from taxpayers should neither ignore the social challenges we are already facing nor exacerbate them. The foundations of automatic enrolment will be in place for decades to come, and it should be ensured now that the scheme will be flexible enough to cater to changing working patterns and societal demands over the coming years, not least for these more vulnerable cohorts. While we appreciate automatic enrolment is not designed to eradicate these issues, it should at the very least be in a position to offer the same flexibility to policyholders that is available in defined contribution schemes already in place.

Second, the scheme should be flexible and fair, and the future auto-enrolment regime needs to respond to members’ needs. With the publication of its straw man for automatic enrolment in Ireland in 2018, the then Government had reached a milestone in this project and gained broad support from public and private businesses and organisations. The final design principles, which were published in March, as well as the general scheme of the Bill, which we are discussing today, included a number of material changes to the straw man and the envisioned structure and working of the auto-enrolment system.

These changes have resulted in consequences unforeseen from what was originally proposed, some of which I have touched on, but an additional challenge relates to the broadening of the role of the central processing authority, CPA. The straw man envisaged that the CPA would act as a processing centre to interact with employers and collect contributions, while the pension provision would be delivered through the existing pension infrastructure, with the associated consumer protection and any liabilities of such delivered through regulated pension providers. The design principles, however, propose the creation of a State-run pension provider in the CPA. According to the general scheme, the CPA will make all decisions relating to the pension scheme, including investment choices and the protection of policyholder assets, and will also be responsible for all liabilities. This is a material change and can result only in a significant increase in the cost and time resource compared with the straw man, requiring experienced pension professionals, from board level down through all levels of the organisation, in an already-stretched employment market in this sector.

Third, the scheme should be future-proofed, and it should avoid the creation of a major public organisation and consequential liability. The Irish Fiscal Advisory Council set out in May 2022 that the automatic enrolment fund would potentially accumulate €21 billion in contributions over ten years. Thereby, the CPA will become the largest provider of financial services in Ireland. The design and build of the proposed CPA will be a complex project that, in our view and the experience of our members, is likely to take much longer to be implemented than the timelines provided for in the automatic enrolment design principles suggest. The establishment of the CPA in this role is also in contrast to successfully operating automatic enrolment schemes in other countries. Rather than creating new and unproven structures, we suggest building on the lessons learned in other jurisdictions and leveraging the solutions in place elsewhere.

Finally, the general scheme lacks sufficient detail on what will happen for scheme members on their retirement. The automatic enrolment system expects employees to invest in a pension with no knowledge of how they will be able to access their fund when they need it. Such uncertainty adds to our considerable concerns about the new regime.

Insurance Ireland and its members strongly support the introduction of automatic enrolment and have long called for such a system. Nevertheless, we would appreciate if committee members would reflect on our feedback in order that we can ensure the new regime will be as successful as possible. A “start now and fix it later” approach is not optimal. Major decisions will have to be taken ahead of the introduction and implementation of the scheme. The future regime needs to be not only effective and efficient but also inclusive, flexible and future-proofed to deliver for society.

I thank the Cathaoirleach and members for this opportunity to present our position. I look forward to answering any questions they may have.