John Paul O'Shea (Cork North-West, Fine Gael)
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Before we begin, I will read a note on privilege and housekeeping matters. Witnesses and members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that would be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction I make.

Members attending remotely are reminded of the constitutional requirement that, to participate in public meetings, members must be physically present within the confines of the Leinster House complex. This is due to the constitutional requirement that, to participate in public meetings, members must be physically present within the confines of the place where Parliament has chosen to sit. In this regard, I ask any members participating on Microsoft Teams to confirm they are on the grounds of the Leinster House complex if they wish to make contributions. I remind all those in attendance to make sure their mobile phones are switched off or in silent mode.

Auto-enrolment is a new savings scheme that will be introduced on 1 January 2026. It is designed to help over 800,000 workers to begin saving for their retirement. The committee welcomes this engagement with officials and looks forward to receiving an update on the introduction of auto-enrolment and the body that will administer the scheme.

I welcome the officials from the Department of Social Protection: Mr. Tim Duggan, assistant secretary general; Ms Clare Dowling, principal officer; and Mr. Donal Spellman, principal officer. I invite Mr Duggan to make his opening remarks.

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.

John Paul O'Shea (Cork North-West, Fine Gael)
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I thank Mr. Duggan. I appreciate the remarks. I will now proceed to members for a discussion. First up is Deputy Louise O'Reilly.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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I thank our witnesses. I have a couple of questions, some about the operation of the scheme and some, obviously, about the run-in to it. How many deadlines have been missed? September was the latest. How many other announcements were there? Were there two or three dates missed? It has been put back a few times.

Mr. Tim Duggan:

The only official date ever announced was 30 September of this year, and that was set in a commencement order.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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There were a couple of others.

Mr. Tim Duggan:

There have been ministerial ambitions regarding dates.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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And those have all slipped by along with the official one. Given that several deadlines have slipped past, is the Department confident it will be ready for the latest announced deadline?

Mr. Tim Duggan:

I am absolutely confident.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Would the Department have been in a position to proceed on the September date had the Government pressed ahead with that?

Mr. Tim Duggan:

We believe we would have been.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Therefore, is Mr. Duggan saying it is the employers that are causing the delay or that business was not ready?

Mr. Tim Duggan:

I do not view it as a delay in that sense; I view it more as a rescheduling, and that is the view of the Minister. Payroll providers, employers and others said it would be helpful to them and make it easier if they could align the system with the tax year, zeroising their payrolls and the development work they do around budget time rather than trying to do it in advance.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Was the September date announced without any consultation with business? I wonder how that could have happened if they are so adamant now that they are not ready for it. The Department pressed ahead with a date in September and now that is being "delayed" again. I hope Mr. Duggan does not mind if I describe it in that way. Was there a miscommunication? I have got some details through freedom of information requests and I know the Department was lobbied fairly extensively by firms in this space. Were the companies telling the Department that while it was pushing for a September deadline, or were they not saying that and then when the Department put in a start date of September they said they would not be ready? How can we have confidence that this is going to go ahead on the specified date, given that a number of dates have slipped? At what point did the companies start telling the Department they were not ready? Was it after September was announced or was it in advance of it but the Department announced it anyway? Does Mr. Duggan see what I mean?

Mr. Tim Duggan:

Once the 30 September implementation date was announced sometime last year, people started to properly turn their attention to the implementation and over time it crystallised for them how it would be easier if it was pushed out by a couple of months to facilitate budget changes at the same time. That became clearer to them once they started working on it.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Was this a specific request of industry? Mr. Duggan was lobbied by State Street Global Advisors Europe. The Minister was lobbied by the Irish Association of Pension Funds and the Payroll Software Developers Association and others. At what stage did they start telling Mr. Duggan that they were not ready?

Mr. Tim Duggan:

It is not so much that they were not ready, it is that they would prefer more time and it would make it easier for them if they were able to do this in conjunction with budget changes.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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So they were ready but they wanted a delay anyway.

Mr. Tim Duggan:

I do not know. We are talking about-----

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Mr. Duggan was the one in the meeting with them.

Mr. Tim Duggan:

We are talking about 130,000-odd employers who have 60 different payroll software systems and hundreds of payroll providers. As to whether I can tell the Deputy all of them would have been ready by the 30 September deadline, no I cannot, but what I can tell her is that they are working and they have been working extensively on getting ready.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Mr. Duggan cannot tell me that 130,000 are ready but he can tell me that 130,000 are working on it. There have been a lot of false dawns with auto-enrolment. It strikes me that it has not been well handled. That is not any disrespect to Mr. Duggan and his colleagues, as a lot of it is down to Government decisions. I understand there has only been one official date but a number of announcements have slipped. Is Mr. Duggan in a position to tell me what is different about this announcement and if he believes it will happen unlike other potential announcements?

Mr. Tim Duggan:

The Government has decided it will be 1 January. The Minister has made it clear that it will be 1 January. We are putting in contracts. We have put in contracts that specify that the work must be done to facilitate that timeline. There are commercial, political and legal commitments to 1 January. I assume-----

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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Were none of those commitments in place for 30 September?

John Paul O'Shea (Cork North-West, Fine Gael)
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Deputy O'Reilly's time is up.

Louise O'Reilly (Dublin Fingal West, Sinn Fein)
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It is just one question.

Mr. Tim Duggan:

The contract for investment managers is being put in place as we speak. That did not exist for 30 September.

John Paul O'Shea (Cork North-West, Fine Gael)
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I call Deputy Ardagh.

Catherine Ardagh (Dublin South Central, Fianna Fail)
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I thank the witnesses very much for coming in. We have been waiting for auto-enrolment for a long time. I remember being in the Seanad when the then Minister for Social Protection, Leo Varadkar, first discussed it. It is a step change when it comes to pensions in Ireland. So many people are looking forward to having their own separate pension. It is long overdue. As an employer I thought we would have to start earlier. We were ready to start. People are waiting for this. As other speakers have said, I hope we do not skip the date again because it must be done this time. We need to see this start in January.

I have a few short questions. My Future Fund is the new name for the project. We just heard about it last week. What is the rationale for rebranding?

I would like to know a little bit more about Tata Consultancy Services. Could Mr. Duggan let the committee know about any previous projects it engaged on? Some background on the company would be very useful.

Mr. Tim Duggan:

As to My Future Fund, it was never going to be called the auto-enrolment scheme. That is just a horrible phrase. It was always going to have a brand name and it was eventually worked out in the normal way brands are developed with creative agencies and so on.

My Future Fund was chosen because, as I said in my opening statement, it reflects what it is, namely about saving for the future. It is about having a fund for your retirement and about it being yours. It is not like the State pension where you are just part of a big State apparatus, it is your fund. The money in it is yours and nobody else's. The brand is designed to reflect those principles.

Tata is a monstrous global company with in excess of 600 million employees worldwide. It is involved in all kinds of business lines. One of the companies within Tata is Tata Consultancy Services, which does business processing, IT systems, managed services and all of that kind of stuff. It does not yet have a great deal of significant contracts in the Irish public service, but it does do a similar job in the UK to the auto-enrolment job it is doing for us, where it is the managed service provider to Nest, the largest auto-enrolment provider in the UK that is operated by the British Government. It has huge experience in running systems and administrations of this type. It also has huge resources available to it to implement the system and to operate it. Tata has some 1,400 plus personnel in Letterkenny already, many of them working on the pension administration system for Nest in the UK, and it will be expanding that workforce to cater for the provision of this service.

Catherine Ardagh (Dublin South Central, Fianna Fail)
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I thank Mr. Duggan. I wish him and the Department well. I know a significant amount of work has gone into this. The Minister, Deputy Calleary, has done a significant amount of work in the run-up to this going ahead. I hope we see it take off in January. I wish Mr. Duggan the best of luck. I thank him for coming in.

Mr. Tim Duggan:

I thank the Deputy.

Anne Rabbitte (Fianna Fail)
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I thank the witnesses for the presentation this morning. I have three short questions and perhaps a little bit of explanation. I have read the statement and I have listened to the contributions. Could Mr. Duggan confirm the fee structure for members of the plan? Will it be based annually on the AMC or is it combined with a fixed fee? If you do not mind, Chair, I will get the responses as I ask the question.

John Paul O'Shea (Cork North-West, Fine Gael)
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That is no problem.

Mr. Tim Duggan:

Could I just correct one thing first, I said 600 million employees. I got really excited. I am sorry, it is 600,000-plus employees. Six hundred million would be amazing. I am sorry about that.

The fee structure will have two components. There will be a flat fee for the administration and an AMC application for the investment piece. When combined, we expect those to be less than 0.5% of assets under management. We are still working on what precisely the flat fee structure will be, but it is likely to be in the region of 50 cent to 60 cent a week per person, which would amount to approximately a cup of coffee every two months.

I cannot yet reveal the investment management charges because we have not finalised the contracts with the providers. In the RFT that we specified to the market we said they had to be less than ten basis points, which is 0.1%. All of the bids that we got significantly beat that. I can assure the committee that the AMC charge will be very low single basis points, which, when we compare with other products on the market, is a phenomenal reduction.

Anne Rabbitte (Fianna Fail)
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To build on that point, will the same fee structure be adjusted for members depending on the amount of funds they contribute to it? Is it the same cup of coffee for people regardless of whether they are on €20,000 or €80,000? How is the fee adjusted?

Mr. Tim Duggan:

The administration fee is the same for everybody because administration is the same for everybody, in the same way that a loaf of bread is the same for everybody. As the investment management charges are based on a percentage of the assets under management, they are dependent on how much you save. Somebody with a small pot will pay a small charge while somebody with a large pot will pay a larger charge.

Anne Rabbitte (Fianna Fail)
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It will be adjusted depending on the fund size.

Mr. Tim Duggan:

It is adjusted based on the fund size, yes.

Anne Rabbitte (Fianna Fail)
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In relation to taxation, how will the member's fund be treated upon death?

Mr. Tim Duggan:

It depends on when the person dies. If a person dies in advance of reaching retirement age, it becomes an asset within the person's estate and is handled in that way, through the estate distribution.

Anne Rabbitte (Fianna Fail)
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Is it subject to income tax or not?

Mr. Tim Duggan:

The tax arrangements for My Future Fund will be set out by the Department of Finance in the forthcoming finance Bill. I am told they will mirror what is currently done for PRSAs, including how trivial funds are handled, as I said in the opening statement. For PRSAs a 25% lump sum is tax free and then the rest has to be invested and drawn down over time. In the case of a trivial pension, which is a pot of less than €30,000, it can be drawn down tax free regardless of whether it is in excess of 25% of the fund or not.

Anne Rabbitte (Fianna Fail)
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Further to last night's discussions in the Seanad regarding the bereavement Bill which is passing through the Houses, does the treatment differ depending on whether the beneficiary is a spouse, a child or another relation?

Mr. Tim Duggan:

I am not a tax expert. Whatever the tax treatment is for any kind of pension arrangement, dependent on the relationship with the person who owned that pot, will be exactly the same as if it was a PRSA. If a person with a PRSA dies, that goes to their estate and is distributed within their estate and the tax treatment applied to that is the same tax treatment that will be applied to My Future Fund, depending on whether the beneficiary is a spouse, a child or some other relative, or not a relative at all.

William Aird (Laois, Fine Gael)
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I welcome the witnesses. It is a very exciting day. I am delighted to be a member of this committee. We will be remembered for all time when it comes to January for having given a helping hand to everybody to be in a pension scheme. I wish the scheme well. It is an onerous task to get something like this up and running. It will benefit everybody in the working community. It is very exciting for people starting off in a career. Many people who are half or three quarters of the way through their working careers would love to have had this at the initial stages. It is being set up now. It is an equal spread across. The Government will make the same contribution to everybody, which is very good. Going forward, it will be an incentive for people to save and to continue their standard of living when they retire. At the moment there are huge anomalies in the system. People had to give up work many years ago because when women married it was not permissible to work in sections of the workforce at that time. Those people are now dependent on their spouses for their old-age pension. It is totally wrong. That has to be fixed. This is a very exciting opportunity. I do not know how anybody could not be in favour of this. I am delighted to be a TD to be present here today.

I wish Letterkenny very well. It is getting many jobs out of this. It is a pity it is not coming to Laois. I would be shocking excited altogether if it was coming to Laois. Unfortunately, it is not. When it starts up, a great many people will have questions on it. I hope there will be a special line of communication for all of those people. I thank the officials and the Minister. I look forward to 1 January for the inaugural part of this.

Mr. Tim Duggan:

I thank the Deputy and very much appreciate his remarks. The Minister is disappointed it is not in Ballina.

Johnny Guirke (Meath West, Sinn Fein)
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When money is invested, the return on it is not known. That will depend on how the investment does over time. When signing up for this scheme, people will not know what they will be able to draw down on reaching pension age. Senator Rabbitte touched on the tax implications. That is the aspect people will probably look at when deciding whether to invest in the scheme. For example, if the fund makes 100% over the lifetime of a person investing in it, will he or she be able to draw down that 100% or would it be a percentage of that 100%? Somebody has to pay for the hundred employees in Letterkenny and the communications campaign around this. Depending on the percentage it makes, what percentage of the fund would the person be entitled to, come retirement age? Will it be a tax-free lump sum? What effect that might it have on small businesses where they have to pay €3 per employee? I refer to small businesses such as corner shops and cafés. That is not a negative take on the scheme; it is just to find out for myself and for others what the implications are when it comes to investing and drawing down.

Mr. Tim Duggan:

The treatment at drawdown will depend on a number of factors. The first is how big a fund the person has. The second factor is the various drawdown products that may or may not be available when they do it and the third is how that is dealt with in taxation terms. What is definitive, though, is that once a person's pot is crystallised on retirement there will be no charge on that pot for the national automatic enrolment retirement savings authority, NAERSA, or Tata Consultancy Services, TCS. NAERSA and TCS are paid from the administration charges that are applied every week on every contribution so there will be no charge on the pot when it is drawn down at retirement to pay for administration.

As I said to Senator Rabbitte, based on discussions with finance officials my understanding is that drawdown from My Future Fund will be taxed in the same way that PRSAs are taxed. The simple explanation for that is that a person will be able to draw down 25% of their pot as a tax-free lump sum and the rest will go into some kind of pension vehicle. That could be an annuity, an approved retirement fund, ARF, or it could be something new that is developed over the coming years. One of the jobs of NAERSA will be to look at options for drawdown products for participants in this scheme. It is not necessary to have them right now because anyone who is automatically enrolled in My Future Fund from January next year will be in it for at least six years before drawing anything down. There is time to look at options that are available and try to build something that is particularly useful for the participants in My Future Fund. There are no administration charges on the drawdown and the tax treatment is going to be the same as applies to PRSAs. If a person's fund is less than €30,000 when drawn down, the trivial pensions taxation arrangements apply, which means they can draw it all down as a lump sum. NAERSA will be looking at developing products and possibly engaging with the market to develop new products for drawdown that are particularly suited to participants of My Future Fund. An example of that might be a combination whereby it is not necessary to choose between an annuity or an ARF. A person might be able to draw down part as a lump sum, put some of it into an annuity to guarantee a particular level of income every week for the rest of his or her life, and put some of it into an investment vehicle so that it continues to grow over the period of retirement.

There is no such hybrid product on the market right now, but there is a possibility that could be designed over the coming years and made available through My Future Fund. That will be explored.

Johnny Guirke (Meath West, Sinn Fein)
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What is the effect on small businesses?

Mr. Tim Duggan:

Undoubtedly, this is an additional cost for someone who is employing people. However, it has been deliberately designed - some people have criticised this because they say it takes too long to get to the maximum rate and the level of contribution is too low - that instead of introducing the contribution at 6% from the beginning, it is phased in over a decade to allow employers and employees to adjust budget-wise to this new cost on employment. The experience in other countries has shown that when it is introduced on a gradual basis like this, it becomes part of the normal remuneration negotiation that goes on between employers, employees and employee representatives on a continuous basis. Over that ten-year period, even though it starts out as a cost on employment, it should work its way into the normal remuneration packages of employees as part of those negotiations.

Pat Gallagher (Donegal, Fianna Fail)
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I thank Mr. Duggan for his presentation. I welcome the principle of auto-enrolment. When this was being formulated, and it was in gestation for some time, were there communications with IBEC or small businesses? Those of us who come from rural areas will always think of the additional costs on companies. The interesting thing about this scheme is that I have not heard too many complaining. I hope that is a good sign and that they want to be part of it because if their staff are happy, it is a good reflection on the company.

I welcome the additional jobs for Letterkenny. It brings me back many years when I turned the first sod on behalf of Dr. Michael Woods, who was Minister for social welfare at the time, when the building that is there now was built. How many jobs will be created in Letterkenny if additional facilities are required? What will be the grades of those jobs? Will it be largely clerical officers or executive officers? Will a new panel be established nationally or is there a significant number on the panel at the moment to be able to draw down from that?

Auto-enrolment is important for those who would not have had a pension otherwise. To take a hypothetical case, for someone aged 55 at the moment who is faced with only the non-contributory old age pension, at what stage will that person be in a position to avail of the full pension if he or she buys into this system?

Mr. Tim Duggan:

There has been extensive consultation with both employer and employee representatives of all kinds since we started this project for real back in 2017. When we produced what we call the "strawman proposal", we engaged in a major public consultation exercise at that time. We toured the country and visited many centres. We held open public forum meetings. We did online surveys, focus groups and all that kind of stuff. Emerging from that was this ten-year lead-in time, going from a low contribution level up to the maximum contribution level. That idea emerged from that consultation exercise because both employee representatives and employer representatives felt that going much faster than that would be too penal and result in too great an income shock and cost shock for employers.

Extensive consultation has continued with employer and employee representatives through the Labour Employer Economic Forum, the LEEF structure, that the Government operates but also bilaterally. We have had many meetings IBEC. We have had meetings with ISME, small firms and numerous other employer representative bodies. We have run numerous webinars with all of them over the past two years to try to ensure that they are up to speed as possible with their obligations under this scheme.

The Deputy is right. Most employers - in fact, practically all of them - are fully supportive of the scheme. Even now, recognising that it is a cost on their business, at least initially, they are still supportive of it because they see the value and benefit of it.

In terms of additional employment in Letterkenny, there are two parts to it. There is the additional employment that will be generated in TCS as a result of being the managed service provider of administration services for the scheme. As I noted in my opening statement, TCS estimates that will be in excess of 100 additional posts. When established, NAERSA will begin with in the region of 35 posts. That may increase to north of 40 eventually. There are different grade structures in that. It will be headed up by a chief executive officer at the deputy Secretary General level. He or she will have three senior managers reporting at principal officer and director level. The other 30 staff will be spread over assistant principal, higher executive officer, executive officer and clerical officer levels. The competition for the CEO is concluding this week. For the three senior managers, the competition will be concluding during August. We are running competitions and expressions of interest for all of the other positions over the course of August, September and October.

Pat Gallagher (Donegal, Fianna Fail)
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Will the roles be specifically for Letterkenny when applicants are being invited?

Mr. Tim Duggan:

All posts are in Letterkenny.

Pat Gallagher (Donegal, Fianna Fail)
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I want Mr. Duggan to be fair about it. As long as 99% of them are from Donegal, we will be happy about it.

Mr. Tim Duggan:

I am sure Donegal people will put their best foot forward to try to achieve the Deputy's wish.

Noel O'Donovan (Fine Gael)
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While there was a discussion about jobs coming to Letterkenny and Donegal, I hoped Mr. Duggan would bring some to west Cork as well.

Mr. Tim Duggan:

One would think I would.

Noel O'Donovan (Fine Gael)
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He might consider it. I welcome his presentation. This is a pragmatic and prudent project to deliver for this country, and not before time. Auto-enrolment is a cost on business. Businesses have had additional costs over the past number of years. Broadly, the scheme needs to be welcomed because any employer wants to keep their employee happy and plan into the future. I will make the point to the Government in the Seanad that in the years ahead we have to be mindful that it is small businesses that have additional costs. That message needs to go back through the Government.

Where employees have an existing pension scheme with their employer, how can that be transferred into this new pension? On the low, medium and higher risk options that will be afforded employees, I presume that is near so that will be advised in the time ahead. There could be an extra burden for employers in terms of advising employees because there will be employees who do not have pension schemes. There is the lack of information and lack of understanding. That is important information that will have to be explained and communicated to employees. How does the Department envisage that will be communicated to employees?

Mr. Tim Duggan:

The Senator is absolutely right. As I acknowledged, at least at the beginning this will be an additional cost on employment. It is a relatively low level, at 1.5%. All studies show that when it is done on an incremental basis over a decent period of time it becomes part of the normal remuneration negotiations and packaging. Therefore, that cost element should dissipate over time. However, the Government and the Minister are conscious that it is, even though it is relatively small, an additional cost in the beginning. That is why that phasing was done. It was to mitigate the impact of that additional cost as much as possible.

Somebody with an existing scheme who wishes to transfer it into My Future Fund will not be facilitated at the beginning. The whole focus has been on getting the system up and going for the 750,000 people who have nothing. That will be the concentration at the beginning. However, there is a design principles document behind this scheme that the Government approved in 2022. It is publicly available but I will send it to the clerk to the committee so that members can all have a look at it if they wish. It sets out what future phases of the scheme may facilitate. One of them is that very thing, which is allowing transfers into and out of My Future Fund, if somebody were either to join an occupational scheme or were to move country and needed to move it. The intention is, once we have the system in, bedded down, operating well, and NAERSA has the capacity to start looking at options for expanding and enhancing the scheme, that one of those options would facilitate transfer in and out. That will come in time.

On the risk strategies and advising people on it, I said that the scheme facilitates choice but does not require it. We expect that the vast majority of people are unlikely to exercise choice at all. That has been the experience with auto-enrolment systems around the world. We expect that well north of 90% of people will not exercise that choice. That means people will go into the default strategy, which is lifestyled, as I said. If they are under the age of 51, their money will be invested in the higher risk options. In the main, those are equities, usually on a global basis. Once they reach the age of 51, their money will be transferred into medium-risk options. Typically, these are built, either on a 50:50 or 60:40 basis, on equities and bonds. The bonds can be made up of government bonds or corporate bonds, but they are primarily government or sovereign bonds. Once people reach the age of 61, their money will be transferred into low-risk funds, which are primarily government and European government bonds.

Employers will not know that and will not need to know it. It is not the job of employers, under My Future Fund, to provide advice to their employees on the structures, formats and options available in My Future Fund. It is NAERSA's job to do that. NAERSA will have comprehensive information on all of these matters on its portal, which people will be able to access. It will also make loads of information available through social media and, if needs be, and people prefer to receive information that way, it can be made available on paper. It is possible that NAERSA may use distribution networks throughout the country to allow leaflets, brochures and things of that nature to be distributed as well. We expect, however, that the majority of people are likely to engage electronically with NAERSA and use its portal systems.

Sarah O'Reilly (Aontú)
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I thank the officials for coming. I agree this has to be broadly welcomed but, like a few people here, I am from a self-employed background. Small- and medium-sized businesses are the backbone of the area I come from. We know that they have struggled with extra costs over the past couple of years. The additional improvements to employees' wages, extra bank holidays, extra sick days and all of that are welcomed by employees but, at the same time, these are an additional burden on SMEs. It was said that this will be at a low level of 1%, but there are all these incrementals or little additionals. Has any impact assessment been done for SMEs regarding the additional payroll burden for auto-enrolment?

Mr. Tim Duggan:

There has not been what you would call a formal assessment with a document that states, "formal assessment of - done", but what has been done are very extensive discussions with business representative groups, from IBEC, down to ISME, the Small Firms Association, SFA, the convenience stores network association, all the hospitality ones and so on. We have had extensive engagement with all of those groupings over the past couple of years explaining this system, outlining its implications for them and hearing those very concerns that this will be an additional cost. I have acknowledged that it will be an additional cost but equally, over time, that cost impact of it will dissipate considerably. I assure the Senator that wage inflation over the next ten years will be massively in excess of 6%. I have never seen a ten-year period where it has not been. This is just an element of that wage inflation that will occur over that long period. In that way, it effectively gets consumed within that remuneration inflation. While there will be a little bit of a hit at the beginning, it will dissipate over time as the scheme is rolled out.

Sarah O'Reilly (Aontú)
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In light of the bogus self-employment scandal in RTÉ, has the Department conducted any research into the potential for employers to reclassify workers? I see that as an issue that is on the increase, particularly in my own area.

Mr. Tim Duggan:

If employers behave badly and try to reclassify people, who are currently classified as employees paying PRSI at class A, as paying class S, then obviously other legal issues are at play there. The scope section in the Department of Social Protection would follow up on that wherever complaints are made or where it came to light that such practices were going on. In the event that somebody were found to have done that and to have engaged in bogus self-employment, they would be liable for the PRSI implications of that and NAERSA would have to use its compliance functions to chase down employee contributions that should rightly have been made to My Future Fund. You are into a whole legal piece there.

There are also provisions within the auto-enrolment Act to discourage employers from behaving in a way that would coerce or seek to persuade employees from not engaging in auto-enrolment, either by forcing them to opt out, suspending their participation in the scheme where they have been auto-enrolled, or dissuading them from opting into the scheme, if they wish to do that. If an employer behaves using such practices, sanctions, penalties and prosecutions can be applied under the auto-enrolment Act by NAERSA in such circumstances.

Sarah O'Reilly (Aontú)
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What statutory, if any, safeguards will be in place to protect against funds being raided, as happened during the banking crash?

Mr. Tim Duggan:

It is very important that everyone understands this is not a State fund at all. It has nothing to do with the State, in fact. All of the money in this scheme is private money. It is exactly the same as if somebody had a PRSA. It is that person's money and does not belong to anyone else. Therefore, the only way the State can get at it is if it were to introduce an incredible piece of legislation, I would have thought, and I assume everyone in this room would have a lot to say about such a thing. It is private money and, as such, it is private property and has all of the constitutional protections that are available for private property. It would be incredibly difficult for a future government to do what the Senator might be suggesting.

John Paul O'Shea (Cork North-West, Fine Gael)
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I have a few questions. I thank Mr. Duggan for coming in and giving us a detailed presentation. There was also a presentation in the audiovisual room this week for Members of the Oireachtas to consult a little more. It is a game-changer scheme, as all members have said. It provides that bit of security for people who have no pension other than the State pension and to have that quality of life going forward.

I think this will be reflected upon in many years' time, to say that the decision made was a good one. I want to say thanks in particular to the Minister, Deputy Calleary, who has been here to discuss this with us and the former Minister, Heather Humphreys, as well. I also acknowledge the last Government, which took the big task on and passed the legislation in July 2024. It is good to see that. In his opening remarks, Mr. Duggan made reference to having that communication and context, when it comes. When people look at their payslips in January and see something going out and something coming in, there will obviously be questions for people. He mentioned in his statement that there will be a phone line and an email address available. This is critically important, because on 1 January there will be lots of questions in relation to it. I know the Department has a very good explanatory document but sometimes that might not be readily available and it is important to have those lines of communication - by phone and online - going.

I know that the UK has had a similar scheme for some years. What engagement did the Department have in reviewing that operational model, per se,compared with the model that is being defined now in the auto-enrolment scheme? Did the Department learn anything from that? Did the Department take any other jurisdictions into account when setting up the auto-enrolment My Future Fund scheme?

Mr. Tim Duggan:

The Chair is right about communications. We have already ramped up in the past week and we will be ramping up even further in the course of the autumn and going into winter. We will be highlighting to people that they will see a new thing in their payslip, which will be a deduction on their pay. It will be happening at the same time as many other budgetary changes that may or may not emerge over the course of October, so people will be looking at a number of different things, perhaps, in their payslips. We will put a lot of effort into trying to ensure that as many people as possible understand that this new initiative is coming and what it means. The Chair is right when he says that there will be people who will miss all of that and therefore there will be phonelines and other means of getting information for them to use to get the assistance and understanding that they need.

We had very extensive engagement with other jurisdictions. We visited the UK a number of times and had engagement with the Department for Work and Pensions there and with Nest Pensions, which is the Government-operated system there. We looked extensively at what Australia and New Zealand have done. We also looked extensively at what some of the Scandinavian countries, particularly Sweden and Denmark, have done. We also looked at other auto-enrolment systems in other parts of the world, such as in Poland and Chile and places like that. We learned a huge amount from looking at those models. Essentially, the design of this system is a distillation of all of the lessons we learned from those models. Examples would include things like the contribution rate. It became very clear that the contribution rate implemented by most auto-enrolment systems in other parts of the world was not sufficient. If one asks any of the designers or operators of any of those systems they will say that the biggest mistake they made was not building in a step increase in the contribution rates, over time. Now they have a big problem in the UK where they are trying to get the contribution rates increased from 3% and 5%. The scheme is 13 years old in the UK, at this stage. In Australia, they took the view at the beginning that they had to invest in low-risk, conservative funds, with the consequence that people did not make any money in their pots. The situation almost became a scandal and it became clear that they needed to do something very different regarding investments. They found that there is just as big a risk going for low-risk investments in that people's money does not grow and therefore does not provide them with adequacy in their retirement.

We learned those types of lessons. We also learned if it is all done through the market - and we are doing some of this through the market, using market investment managers and market administrators - without a degree of State management and regulation of the system, it can result in a lack of consistency and quite different offerings being made to people. We also learned that the cost can be significantly greater. The beauty of what we are doing is that bringing it all together through one scheme means that the scale allows us to reduce the cost massively. As I said earlier, the assets under investment management charges is a fraction of what one would normally expect in the market. In addition, it is a consistent scheme for every single employee who participates in it.

The last big lesson was to do with incentivisation. I am sure the committee will hear people giving out about the fact that tax relief is not being used in this system and that we are using a State top up instead. Tax relief would not have done a great deal for nearly three quarters of the people who will be in the scheme. This is because they pay tax at 20% or they do not pay tax at all, because they earn so little. Consequently, there would have been little or no incentivisation from the State, if we were to use the tax relief system instead of a State top up. First of all, this approach enhances the pension pot because the money goes directly into it and second, it is consistent, in that regardless of a person's level of income, the State incentivisation is set at the same rate. In this way, it does not favour people who are better off over people who are not as well off.

We learned all of those lessons and distilled them as best we could into the design that is reflected in the legislation now.

John Paul O'Shea (Cork North-West, Fine Gael)
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Thank you, Mr. Duggan. From your comments and those of your team, I think we can be confident about being online for 1 January and that there will be no further delays, which is important. Senator Rabbitte has indicated that she wants to come in again.

Anne Rabbitte (Fianna Fail)
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I should have said in my initial contribution that I want to thank the witnesses for the work they have done. It is great to have it in the programme for Government. It is wonderful to have the Minister behind this and it is good that the witnesses acknowledged that previous Ministers have been full square behind getting this delivered for people. It is important, so while I might ask thorny questions, it is only because I think people are trying to understand more about it.

My next question relates to comments by Deputy Gallagher and Senator O'Donovan which Mr. Duggan answered regarding whether funding can be put into it. What about ill health? Say,God forbid, I was to get sick. Say I am 55 and I still have 11 years to run on it, what are the options to support me if I suffered ill health? If it was an occupational scheme, I would have cover to protect me. I take on board what Mr. Duggan has said about the scheme being private but are there any safety clauses for ill health in the case that a person might not be able to continue to work and to contribute to the scheme? That is one of two questions.

Mr. Tim Duggan:

It depends on what the Senator means by ill health. If the Senator means ill health to such an extent that she has to retire, then yes, there is early access provision to one's My Future Fund in such circumstances. If the Senator means ill health as sort of an insurance piece that some schemes offer, then that is not in it. As I said to the Senator in my reply, one of the things that NAERSA will have to do over the coming years is look at additional design features to enhance the scheme. Secondary benefits from the scheme is one of the things that will be looked at. Up to now, the focus has been on getting the scheme going for three quarters of a million people and then we will look at enhancing it afterwards. To sum up, there is early provision if a person has to retire because of ill health, the same as with an occupational scheme and secondary benefits will be looked at down the line.

Anne Rabbitte (Fianna Fail)
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I thank Mr. Duggan for clarifying that, it is very welcome. My next question relates to what Mr. Duggan said earlier about the Revenue assessments. Will Revenue be working in tandem with the Department to say how many people are contributing to occupational pensions at the moment?

I know it was said there are approximately 700,000 people who might have no pensions at all and this will be targeted directly at them but have we a line of sight as to how many people - across the different age brackets as well - have occupational pensions?

Mr. Tim Duggan:

That information is already available through the Pensions Authority. I just do not have it to hand right now but we can certainly get that from the Pensions Authority and send it on to the committee. It will be able to see how many people are in defined benefit schemes, defined contribution schemes, PRSAs and in the other types of schemes as well. I will try to get that granular detail for the committee. The system already has it.

Anne Rabbitte (Fianna Fail)
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To explain it a bit better, it is meeting the minimum requirements I ask about. You could have an occupational pension and be 55 years old but you might not be meeting your minimum requirements. Can Revenue see whether contributions within the occupational pension will meet the minimum requirements to support the person on retirement?

Mr. Tim Duggan:

One of the things auto-enrolment is designed to do is allow you to be exempt from auto-enrolment if you are in an occupational or private pension scheme, operated through payroll. However, the law also sets out that will be subject to exemption standards but they are not yet defined. At the beginning, if you are a member of such a scheme, you are exempt. The law says that within the first six years of the scheme, standards will be defined. For an occupational scheme or a PRSA operated through payroll to be exempt from auto-enrolment, it will have to comply with whatever standard is developed by NAERSA in conjunction with the Department, the Government and the Parliament over the next six years. That is a piece of work NAERSA needs to do.

People automatically jump to that it has to be the same contributions levels, at least. It is not that simple. Contribution levels can be based on different things. In most occupational schemes, they are based on base pay, whereas in auto-enrolment they are based on gross pay. The Senator knows there can be a world of difference between those things when you take into account allowances, overtime and all that kind of stuff. You cannot just do it on a contribution rate on its own, you have to have a more sophisticated manner of developing such a standard. There is a bit of work to be done to come up with such a standard.

Anne Rabbitte (Fianna Fail)
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The Department and elected representatives have worked to ensure we are at this stage. Is Mr. Duggan concerned that over the six years, there will still be a gap for those in occupational schemes if their employer is not gradually partaking in it? I will not use the term "cliff edge", but is he concerned there will still be a sizeable amount employers will have to bridge to bring their employees in-line if they do not get in at the start?

Mr. Tim Duggan:

Does the Senator mean the contribution levels within the occupational scheme will be low and will stay low and, by year six, will not be up at 4.5%?

Anne Rabbitte (Fianna Fail)
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Yes.

Mr. Tim Duggan:

There is the possibility of it happening in a few places but I do not think it would be a widespread practice, to be honest. Most occupational schemes are already reading those kind of thresholds, or thereabouts. There are some that are a little low but the standard in the industry seems to be 5% and 5%, which is in excess of what would be the case in six years' time. I have heard it said there is a danger that because auto-enrolment is starting low at 1.5% and building up to that level over the next number of years, some employers may be tempted to drop their contribution level from the current 5% downwards. Looking at what has happened in other countries, there is very little evidence to support that is a feature when you introduce such systems. Does it mean that one employer might do it? Of course, but by and large it is not a trend we have witnessed occurring anywhere else. I think it is unlikely to be a thing.

Anne Rabbitte (Fianna Fail)
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I thank Mr. Duggan.

John Paul O'Shea (Cork North-West, Fine Gael)
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Why is the timeline six years? Is there a possibility of doing it earlier or within the six years?

Mr. Tim Duggan:

Six years is the maximum, Chair. The reason it is six years is that it is 1.5% for the first three years and it is 3% for the next three. At the end of the six years, in year seven, the contribution rate increases to 4.5%, which is very close to what is typically the rate in occupational schemes. At that juncture, it would be important to start having a standard that would be applicable across all schemes as a consequence.

Peter Roche (Galway East, Fine Gael)
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Apologies for my late attendance, which was due to the health committee next door, which was fundamentally important as well. There is more good in this for the employee than there is for the employer is the way I see it. My initial concerns are for small and medium enterprises and those type of employers. Some of them are operating on very thin margins. Any additional financial burden on them will certainly be of concern. My question is about an impact assessment of this and could it lead to job losses, reduced hours or elements like that. That is my concern. As I mentioned, some of them are operating on a very small margin and some might be discouraged from employing more as a consequence of this financial burden.

Mr. Tim Duggan:

There are different ways of looking at this. We have always acknowledged that at the outset - I said the same in response to Senator O'Reilly - there is an additional cost on employment when you introduce something like this. The initial cost is quite low, at 1.5%, and has been deliberately designed that way. The increase up to the actual rate of 6% is being graduated over a ten-year period, very deliberately, to ensure it can be factored in to remuneration discussions in order that it becomes part of normal wage increases and in that way, does not become a significant additional cost on businesses of any size. That came about as a result of the consultation the Department had with employer representatives of all types, from the big groups like IBEC down to the very small representative groups for hospitality, convenience stores and that micro-enterprise level. That consultation has resulted in that ten-year phasing-in period to deal with the very issue the Deputy raises.

The ESRI has done an impact assessment of auto-enrolment and has highlighted how it will result in some additional cost but over time, they will dissipate in the way I have said. In addition to that, it will result in people in the future having significantly greater spending capability, which in itself is critically important for small and micro-enterprises so that people in localities actually have money to spend in those localities. Auto-enrolment will be critical to facilitate that in the years to come. Otherwise, as we discussed earlier, lots of people will be critically dependent on the State pension on its own. While that is great at keeping people from poverty and providing them with necessities, it is not great for facilitating the discretionary spend on which a lot of micro-enterprises are critically dependent.

Peter Roche (Galway East, Fine Gael)
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This minute, I think about Joe Public; the person who is down there in rural Ireland and is beavering away this morning and everything is going grand. Here, we are fully aware of what is coming down the tracks and I am not saying it is bad but in terms of the general employer, how will this information about the scheme filter down to them and how will they be informed about its introduction or the impact it may have on them?

Mr. Tim Duggan:

They are two different things. We have been doing extensive work with as many representative organisations as possible to try to get messages and information delivered to all kinds of employers. That has been done through webinars, leaflets, turning up in person at events that they organise and all of that kind of thing, and we will do a lot more over the coming months. If there are any groupings or representative bodies that the Deputy wants us to engage with, or bodies he has some influence with whereby we can get introductions to them, by all means, he should let us know. We will meet anybody to discuss this and explain it to them in as much detail as they need. We are doing that. We have already reached thousands of employers, but we want to do a lot more of that because there are so many employers, particularly of the type mentioned by the Deputy.

I do not sit in an ivory tower. I have a brother in west Cork who runs such a microenterprise and, believe me, I get it in the neck any time we mention anything that results in an increase in costs for him. I absolutely appreciate where the Deputy is coming from in highlighting this. It is designed by consultation with employer groups in order to phase it in as best we can and to mitigate that implication.

With regard to employees, we are undertaking a massive public relations campaign right now. If the Deputy looks at buses going up and down the road, he will see the ice cream advertisement, and it is also on television, radio and all social media. That is the beginning of our intensive campaign. We will be ramping that up over the coming months and doing much more to engage as many people as possible and help them understand it.

We have an auto-enrolment hub that has a lot of information for all kinds of stakeholders, such as employers, employees, agents and so on. Anything they need to know about the system, and how it will work and be implemented, is there. We are more than willing to engage with any party to assist.

Peter Roche (Galway East, Fine Gael)
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One body that I hear a lot from, as I am sure others do, is the Restaurants Association of Ireland. The restaurant sector is one that is really struggling. I can see an issue with regard to this scheme because restaurants are struggling as matters stand, and I feel that any additional burden on them could potentially mean closure and certainly job losses.

John Paul O'Shea (Cork North-West, Fine Gael)
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Thank you. We are out of time so we will have to pause the discussion. I thank the officials for attending. It was a very engaging and proactive discussion on auto-enrolment. I wish them well in their preparations over the next couple of months. The committee will be keeping informed with regard to progress. I am sure we will have the officials back in with regard to how the scheme is going in 2026. I again thank them for their attendance and for providing the briefing material, which was very helpful.

We will suspend to facilitate a change of witnesses.