Heather Humphreys (Cavan-Monaghan, Fine Gael)
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I thank members for attending today and for facilitating the early hearing of Committee Stage of the Bill.

The implementation of the automatic enrolment, AE, retirement savings system represents probably the single biggest reform of the pension system in the history of the State. I reiterate the Government’s commitment to the State pension remaining the bedrock upon which the Irish pension system is founded. I want to make it clear that auto-enrolment is not being set up to replace the State pension or undermine it in any way. AE will be an additional source of income in retirement on top of the State pension. This is a key message that I will continue to emphasise as we implement the new system.

AE is needed because both pension coverage and pension adequacy, particularly in the private sector, is too low. This is despite the significant financial incentives offered by the State that exist in the form of tax relief on pension contributions. For me as Minister, continuing with a situation whereby approximately two thirds of private sector workers may be totally reliant on the State pension for their income when they retire is not acceptable.

When enacted, the legislation will pave the way for approximately 800,000 workers to be brought into a retirement savings scheme for the first time. As I outlined in my Second Stage contributions, the Bill will provide for a new, highly-automated, high-quality retirement savings system that will automatically enrol workers based on payroll data.

The Bill also provides for the establishment of a new State body, namely, the national automatic enrolment retirement savings authority, NAERSA, to administer the scheme and act as a buffer between participants and the financial investment companies that will be tasked with growing their savings. The authority will act in the best interests of participants at all times. It will collect contributions, arrange for the investment of contributions, manage participant accounts that will be accessible through an online portal and facilitate the payment of savings at retirement.

The legislation provides for the automatic enrolment of employees aged between 23 and 60 who earn more than €20,000 per year across all employments and who are not already paying into a pension scheme in respect of some or all of those employments. To encourage workers to maintain participation, workers will have their retirement savings matched on a one-for-one basis by the employer. In addition, the State will provide a top-up of €1 for every €3 saved by the worker. All in all, for every €3 saved by the employee, a further €4 will be contributed by the employer and the State combined, resulting in a total saving of €7.

Participants will be allowed to opt out or suspend their contributions after a mandatory six-month participation period. That mandatory period is very important because it will allow workers to see their savings pots increase very quickly in that short time with the matching contributions from their employer or employers and the State top-up. When they see that, I believe it will be clear to them that this is a good thing and they will want to stay in. However, where somebody does opt out for whatever reason, they will receive a full refund of their personal contributions. They will then be re-enrolled again after two years. Participants’ money will be invested in line with an age-based default strategy that will benefit from compounding growth in the early years of the investment lifecycle while reducing risk as the individual participant nears retirement.

As I have said previously, long life is a blessing, not a burden. Implementation of AE will help workers maintain a good standard of living after their long years of working in paid employment.

At this stage, I wish to inform members of the committee of my intention to bring a number of amendments to the Bill on Report Stage. The Office of the Parliamentary Counsel is currently drafting these in an appropriate manner. These are mainly of a technical nature to ensure that this digitised and automated system operates as intended in the agreed design. As these amendments could not be ready in time for Committee Stage, I will introduce them on Report Stage. These amendments are as follows: a number of typos and technical amendments the drafters are looking at fixing. Following on from observations on the published Bill from colleagues in the Department of Finance, I wish to include "pan-European personal pension products’", or "PEPPs", as being among the existing pension products that are relevant to sections in the Bill dealing with exempt employment, the standards to be developed for the purposes of section 51 and the determinations subject to internal review.

With regard to provisions on the suspension of contributions and notification and verification of death, I wish to ensure the procedures should be specified and published by the authority as operational matters, rather than prescribed by regulation.

Where reference is made to a person's "correspondence address", I wish to add in a qualification that this is relevant only where that address is known or is available to the authority. With regard to regulations for the purposes of communications and services, I wish to ensure the whole Act and not just that part of the Act is taken into account.

Finally, I want to ensure that any potential gap in data that is to be provided by the Revenue Commissioners to the new authority with regard to the payment of contributions by employers to NAERSA or the payment of contributions by workers and employers into existing pension schemes is plugged. This is an operational matter that is being considered at the moment by my Department and the Revenue Commissioners. In short, I expect to propose amendments that will allow for the transfer of payroll data from employers to the new authority to ensure that a reconciliation exercise can be undertaken; and from employees to the authority in respect of their joining another pension scheme. I am told that two minor technical amendments will bridge this potential operational gap.

Once again, I thank the committee for facilitating the hearing and debating of the Bill today. I look forward to our discussions.