Mr. Tim Duggan:

The introduction of the auto-enrolment retirement savings system, called My Future Fund, is one of the programme for Government’s key reform commitments to support workers. The Minister has made it clear since his appointment earlier this year that it is a key priority for him.

Such a scheme is necessary to address the considerable pension coverage gap that exists in Ireland, where it is estimated that only 35% of private sector workers are in pension schemes despite the fact that successive Governments over many decades have provided very significant incentivisation through tax relief. If not addressed, this low level of coverage means that people in retirement will either be entirely dependent on whatever State pension they can qualify for or will have to rely on assets they have accumulated otherwise. This may result in many people suffering a significant drop in living standards in retirement compared to the period of their working lives. Even where people may already be in a scheme, it seems that many of them may not be saving enough to ensure an adequate income in retirement that is commensurate with their lifestyles.

It is important to note that, contrary to the views expressed by some commentators, the State pension will remain the bedrock of the Irish State pension system, providing retirees with a basic level of income and protecting them against pensioner poverty. In that context, My Future Fund will not replace but simply complement the State pension and provide additional or supplementary income to future retirees to secure their standard of living in retirement.

The legislation to underpin this new system, the Automatic Enrolment Retirement Savings System Act 2024, became law in July 2024. The system has been branded My Future Fund, as this reflects the purpose of the scheme, which is to save and invest for the future, while highlighting that these savings will be the personal property of the participants. That is a key point.

The Minister has announced that the system itself will commence collecting and investing contributions from 1 January 2026, just a short five and a half months away. While the previous Government had scheduled 30 September 2025 for this launch, the Minister felt it prudent to reschedule it by a few short months to provide some additional lead-in time for employers, particularly small and micro enterprises, to prepare and be compliant with the legislation from the start. It also allows the new system to be fully aligned with the standard tax year, and it provides additional time for payroll developers and providers to ready and test their systems for the launch.

There are three core principles underpinning the scheme. The first is that the scheme facilitates choice but never requires it. Default options are automatically employed wherever somebody does not exercise the choice that is available to him or her. That in itself makes it much easier for participants. The second principle is that the scheme facilitates a pot-follows-member approach, which means that where an employee moves from employment to employment over his or her career, that employee can maintain the exact same My Future Fund account without having to start a new one and park the other one. Third, the system is automated through payroll to minimise the administrative burden for employers, especially those that do not have expertise in operating pension schemes. By that, I mean they do not have to set one up, set up trustees or administer a scheme, and they do not have to do anything at all in terms of paperwork.

Those earning in excess of €20,000 per annum across any number of employments, aged over 23 and under 60, and not already contributing to an occupational or private pension scheme through payroll, will be automatically enrolled. It is expected that approximately 750,000 workers will be enrolled in this way, most of them being brought into a retirement savings scheme for the very first time. Participants will be able to opt out after six months of participation, that is, in months seven and eight, at which time they will get their own contributions back, but the employer and State contributions will remain in their accounts.

Participants may also opt out in months seven and eight after a rate increase, which I will cover shortly, and receive back the difference between the new and old contribution rates, but the employer and State contributions will again remain in their accounts. At any other time, participants will be able to suspend their participation for up to two years. If they suspend, they will not get a refund of contributions. In all cases where a person opts out or suspends, he or she will be automatically re-enrolled after two years, after which opt-out and suspension options will be available again. Anybody who is outside the age and income thresholds may voluntarily opt into the scheme. Where people do, their employers and the State will be compelled by the law to contribute as if they had been automatically enrolled. Contributions will be made equally by employees and employers, with the State providing a top-up of €1 for every €3 saved by an employee. In short, every €3 saved by an employee will automatically become €7. Contributions will start at 1.5% of gross pay, increasing to 3% after three years of operation, 4.5% after a further three years of operation, and finally 6% in year 10 and from then on. This will, in effect, add up to 14% of an employee’s gross earnings and is the very least that international evidence suggests is an adequate rate of saving. This incremental implementation of contribution rates is designed to allow employees and employers to adjust over time.

This money will then be invested. Participants will be able to choose from three investment options: low-risk, medium-risk and higher risk options. However, and in keeping with the principles I outlined, they will not need to choose. If they do not, they will be defaulted into a lifestyle strategy based on age, which will be de-risked as they approach the State pension age of 66. Up to the age of 51, a person’s pot will be invested in the higher risk option. Between the age of 51 and 61, a person’s pot will be moved and invested in the medium-risk option. Between the ages of 61 and 66, a person’s pot will be invested in the low-risk option. If people do not want the lifestyle approach, they can choose which risk option they prefer at any age.

People will be able to access their pots once they reach the State pension age of 66. In the first few years of the scheme, draw-down will be limited to a lump sum payment because pots will be relatively small. Taxation arrangements are being provided for separately in the Finance Bill and will broadly align with the tax treatment of PRSAs, including the application of the tax treatment of trivial pensions. Further draw-down options may be developed over the coming years alongside the annuity and ARF options that are already available from the pensions market. All of this will be managed and regulated by a new State body, called the national automatic enrolment retirement savings authority, NAERSA. The authority will determine who will be enrolled, electronically issue notifications of this information to payroll systems, collect the contributions and pool them for onward investment with investment managers. It will provide portals for employees, employers and their agents to access accounts and services. It will provide a customer support service both over the phone and electronically. It will ensure compliance with the scheme by following up where contributions are not collected and remitted, up to and including through the imposition of sanctions, penalties and prosecutions if need be.

We have made excellent progress in getting everything ready for the launch in January. Following an extensive procurement exercise, Tata Consultancy Services, TCS, based in Letterkenny, County Donegal, has been appointed as a managed service provider of the scheme’s administrative services and is busy building, configuring and testing its systems in line with the scheme’s requirements. This will result in the creation of quite a number of positions in Letterkenny, certainly north of 100. Three investment managers, namely, Irish Life Investment Managers, Amundi and BlackRock, have been selected, again following an extensive public procurement exercise, as the investment managers for the scheme. These are busy readying their funds and developing and testing integration with TCS.

We are working extensively with in excess of 60 payroll product developers across a range of payroll providers through the Payroll Software Developers Association, PSDA. We are assisting them with the changes they need to make to their software to facilitate the calculation and collection of My Future Fund contributions. I thank and compliment the members of the PSDA for their intense engagement with us, especially over the past nine months.

I acknowledge the considerable development and testing work we are doing with colleagues in the Revenue Commissioners, which will be providing NAERSA with the vital payslip data that will allow us to make enrolment determinations in the first place. We are making considerable progress in staffing and resourcing the new authority. The recruitment of its chief executive officer is at its final stage this week, as is the selection of board members. Competitions are under way for the senior management positions reporting to the CEO. Various competition types will be run over the remainder of the summer and into the autumn for all other staff positions. In addition, we are fitting out accommodation in our Letterkenny offices for the new authority.

We have already conducted significant communications exercises over the past year. We ran a general awareness campaign on a couple of occasions. However, we focused primarily over the past year on direct employer outreach through webinars and in-person conferences and we have reached many thousands of employers in that way. This will continue and intensify over the coming months. Members might have noticed a step change in our communications campaign over the past ten days as we launched our second-phase information campaign for the general public with television, radio, billboard, public transport and social media advertisements featuring the ice cream. In all cases, we refer people back to our auto-enrolment hub, which has vast quantities of information to explain the scheme to all types of stakeholders. This campaign will intensify considerably over the coming months.

I believe we are well prepared for go-live from 1 January 2026. I expect the scheme to be a truly transformative once it is up and going. I hope this very quick summary, coupled with the booklet I hope members got in advance, has given an understanding of the scheme and how it works.

Clare Dowling, who is sitting beside me, looks after the policy, legislation, communications and investment aspects of the project, and Donal Spellman looks after administrative and technical operations and integration aspects. Between the three of us, we will do our best to answer any questions members may have.