Ms Jacqueline Thornton:

I can run through that. It might be worth looking at a little of what we call pension lifecycle to see where the need for flexibility comes in. Say you start taking out a pension at 18, 19, 20 years, if we are in an ideal world, and you start saving, there is not a huge need for flexibility at that point. What you are doing then is putting money aside and letting it grow. You have a cheap and cheerful pension so it is low cost, low investment availability and low investment options are all fine for that cohort. That is obviously in line with the auto-enrolment principles. As you go through your career and life, your circumstances change. When you get to age 31 or 32 years, say, your circumstances change and you will be looking to buy a house and perhaps start a family or you might be cohabiting or getting married and you might be looking at your pension then. Hopefully at that stage you are earning a little bit more so that you have a little bit more to put into your pension. Then you might say that in order to promote the adequacy of your pension in retirement you will top up your contributions. You cannot do that with the auto-enrolment system. You cannot top up and make extra provision for your adequacy in retirement and neither can your employer. If your employer wants to make contributions and say, for instance, that an employee is very good and the employer wants to keep them so that they will increase the employer contributions, they cannot do that. We keep coming back to it but this especially affects women who are taking breaks for maternity or carer's leave and who want to shore up the adequacy of their pension by making additional contributions; they cannot do that. Some of our members provide benefits for their female employees who come back after maternity leave where they back pay or overpay for a year to shore up the hole in the pension savings that would have happened due to maternity leave. They cannot do that with the auto-enrolment scheme. You might look at your pot and move your pension savings into a defined contribution scheme that does offer that kind of flexibility but unfortunately you cannot do that either because once you start in the auto-enrolment system your money has to stay in the auto-enrolment system. Once your pot grows to allow you the flexibility you need to stop-start or overpay or underpay, then there are issues with the proposed auto-enrolment. Those flexible options already exist in the defined contribution world and that is what we are saying. We are saying that auto-enrolment should be at least as flexible as what is there in private pension provision.

The changes to the strawman proposals are quite interesting. We do not know what might have brought them about. I mentioned that the Department would have been doing quite a lot of research on international comparisons and would have looked at them at some point between when the strawman proposals were published in 2018 and the publication of the design principles last March. The central processing authority was broadened out and became a bigger structure and a bigger authority. In effect, it is becoming a pension provider. You can see that in the general scheme because it will be regulated as an investor relations, IR, so it will be a regulated pension provider. Unfortunately, I cannot hazard reasons as to why that has changed. We have done some research and looking at some of the feedback we received on the strawman proposals, the suggestion was made that rather than having a central processing authority to use something like Revenue, for example, because Revenue has all the details. I believe the National Treasury Management Agency, NTMA, was also suggested. We have not seen anything about broadening out the central processing authority. We could not really answer for that one.

On retirement, the question about decumulation has come up. The OECD has published a document on best practices in auto-enrolment which ranked what it regards as the most important things when a country is considering bringing in an auto-enrolment structure. Decumulation and being clear on the decumulation options at retirement were ranked as high. That is something we do not have here. As we understand it, the position is that at retirement the existing decumulation options at the time will apply. Obviously we do not know what they will be. We are going through a period of what has been called pension simplification. The interdepartmental pensions reform and taxation group, IPRTG, has made suggestions some of which are to change the decumulation options. Currently, with this auto-enrolment scheme, we are asking individuals to start investing into a pension at 23 years with no sight of how they will access their fund. How much they will get in retirement is a different issue because obviously there are very strict rules around projections and how much you have to disclose to people who are taking out a pension on how much their income in retirement is likely to be. They are required and mandated on that and there are quite strict rules about how to do it. However, at this point we have no sight on how, whether it will be an annuity, an accrued retirement fund or something else altogether?