Mr. Robert Nicholson:

I will just add a point. As Mr. Duggan said, after 6.5 million have been registered in the UK of a total target of about 11 million, it represents around 90% with a 10% opt-out. The initial indicators are that the opt-out rates are highest among the over-50s. The opt-out rates are not higher for lower-income earners compared to others. Typically, the over-50s would opt out at a level of somewhere around two to one, based on the fact that they are closer to retirement and do not see the same demands or opportunities from the system. On initial evidence, therefore, the opt-out rates are highest among the over-50s. That goes to show the crucial design element of any universal retirement savings system. We have looked at such systems all over the world, including talking to the UK authorities and the OECD. What has been highlighted is the need for consensus on how the system is designed. One must get the fundamental design aspects of the system right if it is to be an opt-out system. No decision has been made on that.

It ties in with the Senator's question about tax relief. As regards a universal system, tax relief is a matter for the Department of Finance, not our Department. Based on some of the work we have done, in a mandatory system tax relief does not necessarily come into it if the State decided it does not want it to. That is because if somebody has to be in the scheme, one does not have to give a financial incentive. If one decides on an enrolment, opt-out system the financial incentives become critical. As part of the consultation process on universal retirement savings, the discussions included a number of views. Among some it was felt that the tax relief is skewed towards higher earners. According to the feedback we got from particular interest groups, it was stated that that was not surprising because higher earners typically pay a much higher level of income tax. It is therefore not surprising that they would get a higher level of relief. A similar constituency also said that we pay higher PRSI which is redistributed through the first pillar State pension. They also said that one needs to look at it not just on what relief is obtained in going in because tax relief on pensions works on an exempt tax situation - that is, tax on the outside, coming out. So one needs to look at it in its totality. Having said that, the target for a universal retirement savings system where we would be enrolling around 500,000 middle and low-income earners, may not be entirely consistent with the tax relief system as it is.

Other states that have introduced automatic enrolment, examined tax rebates, matching contributions rather than tax relief, and other forms of financial incentive to ensure that the system's policy objective matches the system of financial incentivisation. Therefore there is a lot more work to do on that in order to understand what the outcomes of any changes would be. Without capacity, one cannot make any changes, but incentivisation is a crucial aspect of any universal system.