Dr. Claire Keane:

We did look at an alternative income cut-off of €14,000. This was work we did for the Department of Social Protection, Community and Rural Development and the Islands because it was trying to figure out the appropriate income cut-off. First, it is hard to compare with the UK because average wages are lower there and average pensions are lower there so what we want to do is to make sure people have an adequate replacement rate so that the income they get in retirement is roughly similar to what they got while they were working. That is probably even more important for people on lower incomes because if I am on a higher income then maybe I have my mortgage paid off and have more discretionary spending and can cut back a bit more whereas people on lower incomes, if they are relying just on the State pension to cover their costs, may need to have more. From 70% to 80% of a person's income is what we think of as an adequate or high enough replacement rate. If we look at the State pension we are talking around €14,000 to €15,000 per year and a person does not have to pay tax on that if they do not have an occupational pension. Compared to someone who was getting €20,000 before it is probably roughly adequate. Making someone who was on €14,000 or €15,000 contribute in the short term, that may be harder for them; having to pay the 6% charge, people on lower incomes might have even more affordability issues than people on higher incomes. It is very hard to pick what the best level is but if we go too low we are taking money from people all of the time when they are working and then they are getting the State pension which is probably an adequate amount for them anyway. It could be slightly lower but it is important to note that people can opt in. If I am below €20,000 but I feel that I want to have a top-up to my State contributory pension over my lifetime then I can opt in as well. What we imagine will happen is that generally people's earnings rise over time so just because I am on €20,000 now when I am 18, 19 or 20 does not mean that I will be on that for the rest of my life so I will probably get auto-enrolled in the future. Given that opt-in option where people can decide, yes I can take a 6% hit to my current income for the longer term, I think that €20,000 is probably a realistic and roughly appropriate level. It would obviously have to be monitored over time as incomes rise. People being able to opt in and pay into it themselves if they want to is important.