Heather Humphreys (Cavan-Monaghan, Fine Gael) | Oireachtas source

If a person has a PRSA and it is not deducted through payroll, he or she is automatically put into the AE system, because this is a payroll deduction. AE comes from payroll deduction. We feel that the wording of this section is important. It states that the first standard would be drawn up from a date no later than "the beginning of years 7 to 9." That means that the standard for employments to be exempt from AE are to be drawn up by the end of year 6 at the latest. The reason we are leaving it until that time is that we see some of the contributions increase. Initially, we start off with 1.5%. It increases gradually up to a maximum of 6% in year 10. We want to see the changes that brings in. In any event the employer and employee contribution rates will only increase from 3% to 4.5% in year 7, whereas contribution rates in employment-based schemes are generally at the 5% level for both employers and employees. The issue will not kick in until the AE levels are at a higher level. There is going to be a huge amount of work in defining the standards. It is not just a matter of looking at the contribution rate. That is what can be compared but there are many other issues to look at as well because standards are not about the contributions made in pension schemes compared to the levels in the AE scheme. There are issues relating to supplementary benefits provided by the schemes, the bases of income from under which the contributions are calculated and how to account for the differences in the financial incentives provided through the different schemes. There is tax relief on one hand and the State top-up on the other. To put it fairly simply, does a scheme give other benefits? Does it have a death-in-service benefit? Does it have a spouse's pension? How is it calculated? Is it calculated on gross pay? AE is calculated on gross pay. That includes overtime and any extras an employee gets. However, most pensions schemes are actually based on basic pay. There is a good bit of stuff here. We looked at it and felt that at the end of year 6, at the latest, and we could do it sooner – I am happy that we could look at it sooner – but at the end of year 6 at the latest is the best time to do it because the contributions will have ramped up at that stage.