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

I move: "That the Bill be now read a Second Time."

Auto-enrolment has been spoken about in Ireland for 25 years. I believe it was the late Seamus Brennan who first raised it.

I am delighted at long last to be introducing the legislation in the Dáil which will give effect to auto-enrolment in Ireland. Today is a major milestone and it is the culmination of years of policy development, consultation and discussion with stakeholders, and decision-making on how best to supplement income for people in their old age. Enactment of this Bill will pave the way for around 800,000 workers to be brought into a retirement savings scheme for the first time. Indeed, implementation of the automatic enrolment retirement savings system represents probably the single biggest reform of the pension system in the history of the State.

Implementation of auto-enrolment is needed because both pension coverage and pension adequacy, particularly in the private sector, are too low. It is estimated that only one third of private sector workers are actively contributing to a pension scheme. This will mean that approximately two thirds of private sector workers may be totally reliant on the State pension for their income when they retire. For me as Minister, this low a level of pension coverage is not acceptable.

At this point, I reiterate that the State pension is, and will remain, the bedrock upon which the Irish pension system is founded. This is the policy intent of this Government and it is a view that I know is shared across the House. However, the State pension is about ensuring that retired people stay above the poverty line. To ensure that workers can maintain an adequate standard of living in their retirement, individuals require additional savings for their retirement. While some employers provide occupational pension plans and other retirement savings arrangements for their employees, there is a large gap in retirement savings, which this Bill seeks to address. The goal, then, of auto-enrolment is to increase pension coverage and pension adequacy in Ireland.

Pensions are complex and people tend to put their pension on the long finger. A key feature of auto-enrolment is that it flips the current voluntary system of saving for retirement whereby people will have to consciously opt out rather than opt in The experience from other countries clearly shows that the numbers who opt out are very low. Ireland is the only country in the OECD that does not yet operate this or a similar system as a means of promoting retirement savings. In this regard, Ireland has been an outlier in terms of pension coverage for too long, but this is now going to change.

This Bill provides for a new, highly automated retirement savings scheme that will automatically enrol workers based on payroll data. Initially, employees aged between 23 and 60 years who earn over €20,000 per year and who are not already paying into a pension scheme will be enrolled. Participants will be allowed to opt out or suspend their contributions after a mandatory six-month participation period. They will be brought back into the system again after two years unless they have an alternative pension arrangement.

I have listened to the concerns of businesses. For this reason, contribution rates will be phased in gradually over a period of ten years. Starting in 2025, employees will contribute 1.5% of their gross earnings, which will be matched by their employer and topped up by the State. These rates will gradually increase every three years until reaching a maximum contribution rate of 6% per employee and 6% per employer, plus 2% from the State, from 2034 onwards. This steady phasing in allows time for employers to budget and plan, and for employees to adjust to the new system. In order to encourage workers to participate, people who choose to remain in the system will have their pension savings matched on a one-for-one basis by the employer. The State will also provide a top-up of €1 for every €3 saved by the worker. This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined, resulting in a total saving of €7. It is estimated that a worker on the national average wage, contributing consistently for 40 years, could build up a savings pot of approximately €750,000, including investment returns, over the course of their working life.

The Bill also provides for the establishment of a new State body, the national automatic enrolment retirement savings authority, to administer the scheme and act as a buffer between participants and the financial investment companies which will be tasked with growing their savings. The authority will act in the best interests of participants, 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.

I will now go through the Bill by section. Sections 1 to 5, inclusive, provide for the Short Title and commencement, the definition of common terms, the making of regulations for the purposes of this Bill and provisions in respect of the serving of documents, and deals with the expenses incurred in the administration of this Bill.

Sections 6 to 9, inclusive, set out the definitions for Part 2, the establishment day provisions, the creation on establishment day of a body to be known, in English, as the national automatic enrolment retirement savings authority. The Irish language version is included and the principal functions of this new authority are set out. These functions include the enrolment of participants; the collection of contributions from participants, their employers and the State; the investment of those contributions; and the payment of retirement savings out of participants' accounts. Section 9 also outlines that the authority shall be independent in the performance of its functions and that it operates in the best interests of participants.

Sections 10 to 21, inclusive, provide for the arrangements for the board of the new authority. These include the number of board members, the term of office, the conditions of membership of the board, how certain individuals become ineligible or disqualified as members, arrangements for the removal of board members, meeting arrangements, arrangements for the working of various committees of the board, including an audit and risk committee and an investment committee, and for the remuneration and expenses of board members and committee members.

Sections 22 to 24, inclusive, set out provisions in respect of the disclosure of material interests and non-disclosure of confidential information.

Sections 25 to 29, inclusive, provide for the appointment process for the chief executive, the functions of the chief executive, his or her accountability to the board, the delegation of certain functions by the chief executive to a member of staff of the authority, the circumstances where a person becomes disqualified from being a chief executive, and the arrangements for the removal of the chief executive. Section 30 provides for the staffing of the authority.

Sections 31 and 32 provide for the appointment and engagement of consultants and advisers and the engagement of the services of any other provider. Section 33 provides for the chief executive to be accountable on relevant matters to the Committee of Public Accounts, while section 34 sets out the arrangements for the chief executive, or an employee of the authority nominated by the chief executive, to attend before an Oireachtas committee.

Section 35 provides for the setting of fees payable to the authority for administrative costs and investment management services, while section 36 provides the authority with the power to borrow money. Sections 37 and 38 provide the arrangements for the authority to prepare a strategy statement every three years and a plan on an annual basis. Section 39 requires the authority to keep proper annual accounts and to submit such accounts for audit by the Comptroller and Auditor General.

Section 40 provides for the submission of an annual report on the performance of the principal activities of the authority, while section 41 provides for the submission of further reports that the Minister may consider appropriate to any particular matter relating to the functions of authority. Section 42 requires the authority to publish statistical data relating to participation in the auto-enrolment system and other statistical information as may be prescribed, while section 43 provides for the authority to monitor and review the operation and effectiveness of the auto-enrolment system.

Sections 44 to 46, inclusive, provide for the Pensions Authority's supervision of the authority, including the submission of a supervisory report, and provide for the authority to pay an annual fee to the Pensions Authority for the cost of conducting this supervisory report. Section 47 provides for the definition of a number of relevant terms used in Part 3 and relates to enrolment and contributions.

Section 48 addresses what should happen in the event of the death of an employer with regard to the enrolment of employees and contributions. Section 49 provides that a person becomes a participant on the enrolment date assigned to that person, while section 50 provides for the eligibility conditions under which a participant will be automatically enrolled. These include the age threshold of 23 years and the earnings threshold of €20,000 a year. The individual should also be an employee in an employment which is not an exempt employment as defined in section 51, that is, not covered by an existing scheme in that employment.

Section 52 sets out the arrangements regarding standards for existing schemes. It also provides that the authority, in consultation with the Pensions Authority, will draw up these standards in due course, that is, by year seven of operations at the latest.

Section 53 provides for those who are not participants to have a right to opt into the system, should they wish to do so, under certain conditions, while section 54 provides participants with the right to opt out, under a given set of circumstances.

Section 55 sets out the requirement for the authority to automatically re-enrol individuals who opt out, should they continue to satisfy the conditions for re-enrolment, after two years. Section 56 provides for the amendment of the age limits and earnings thresholds through regulations. Section 57 defines that a participant who is under pensionable age is a contributing participant.

Sections 58 to 61, inclusive, provide for the payment of the participant, employer and State contributions to the authority at the appropriate rate, as set out in section 61. Section 62 sets out the arrangements for the suspension of contributions. It provides that the period of suspension may begin not less than six months after enrolment or re-enrolment and not less than six months after the end of any earlier period of suspension. Sections 63 and 64 provide for the authority to repay contributions in certain circumstances, including the participant's own contributions where they have opted out.

Section 65 provides for the Minister to prescribe a different upper earnings threshold. Section 66 provides for regulations to be made by the Minister on a range of technical matters on the operation of the enrolment and contributions part of the Bill. Section 67 provides for the definition of terms in Part 4 of the Bill relating to the investment of contributions. Section 68 sets out the arrangements for the authority to appoint investment management service providers, with section 69 requiring each investment management provider to provide three funds, each of which must be aligned to a risk rating, ranging from higher to medium to lower risk.

Section 70 sets out how participants' contributions are assigned to the funds with the appropriate risk level. Where a participant chooses a fund type, they are assigned to the funds with that level of risk. Where a participant does not make a choice, they are placed according to the default strategy in the appropriate fund type based on their age.

Section 71 provides the Minister with the power to make regulations allowing for investment to be split across funds of different risk levels. Sections 72 to 74, inclusive, set out the arrangements for the management of participants' contributions and the investment rules to be observed by the investment managers. Section 75 specifies the requirement that contracts with investment management providers must contain provisions relating to environmental and other matters. Section 76 requires the authority to keep an account for each participant recording the information specified.

Section 77 amends the Investment Intermediaries Act 1995 to exclude the authority from its scope. Section 78 sets out the definitions for Part 5 payments out of accounts. Section 79 sets out the processes for notifying the authority of the deaths of participants. Section 80 gives the Minister the power to make regulations to provide for the transfer of participant moneys to retirement savings products such as an annuity or an approved retirement fund.

Sections 81 to 84, inclusive, set out the process for the redemption of a participant's investment holdings, the process for payment to a participant at or after pensionable age and the process for payment in the event of death of a participant. Sections 85 to 88, inclusive, set out the process for applying for early access to funds in the event that a participant retires through incapacity or in exceptional circumstances of ill-health, and for the redemption of their savings.

Sections 89 to 99, inclusive, set out the necessary provisions for the application of the Dormant Accounts Act 2001 to savings in the auto-enrolment system. A participant's auto-enrolment savings account becomes an unclaimed balance 15 years after the authority has issued a notification of eligibility for withdrawal and where there has been no application for withdrawal or a communication from the participant or their personal representative. In such circumstances, an unclaimed balance is to be transferred to the Dormant Accounts Fund, which is managed by the National Treasury Management Agency, NTMA. This transfer does not prejudice the rights of any person under this Part and an unclaimed balance can be claimed through application from a participant or a participant's personal representative.

Sections 100 to 104, inclusive, contain the legislative provisions for the authority to provide communications and services by electronic means to participants on a default basis and by other means, where requested. Section 105 sets out the form and content of the annual statements to be provided to participants and aligns these provisions with the arrangements for current pension schemes. Section 106 provides for the application of the Freedom of Information Act 2014 to the authority. Sections 107 and 108 contain the legislative provisions relating to the sharing of information between the authority and a specified body, as well as with the service providers that the authority will procure for the administration and investment services.

Section 109 makes provision for the disclosure of certain information to the Minister for Enterprise, Trade and Employment or the Workplace Relations Commission, WRC, under certain conditions. Section 110 provides for amendments to the Social Welfare Consolidation Act 2005, relating to section 265 of that Act, which relates to the sharing of information. It also provides for the authority to be inserted into the list of specified bodies set out in Schedule 5 of that Act. Section 111 provides for the processing of personal data and special categories of personal data in line with the general data protection regulation and the Data Protection Act 2018, while section 112 provides that the Minister may prescribe, by regulations, a number of specific processes relating to data protection.

Sections 113 to 119, inclusive, provide for the arrangements for reviews and appeals to determinations by the authority in respect of enrolment, re-enrolment, exempt employments, opting in, early withdrawal arising from ill health, and questions of assessments based on gross pay. In certain cases, those seeking further appeal have recourse to the High Court on a point of law or to the Financial Services and Pensions Ombudsman, FSPO.

Sections 120 to 124, inclusive, set out the arrangements for compliance and enforcement, including the appointment and powers of authorised officers, and the issuing of compliance notices and fixed payment notices. Section 125 provides for the protection of legal privilege. Section 126 allows the authority to maintain a list of persons on whom a fine or other penalty has been imposed by a court under the Bill for two years. Sections 127 and 128 set out provisions to protect employees from penalisation or from being hindered in participating in the auto-enrolment scheme. Sections 129 and 130 bring incidents that arise in contravention of sections 127 and 128 under the remit of the Workplace Relations Commission and set out amendments to the Workplace Relations Act 2015 to facilitate this. Sections 131 to 137, inclusive, set out the provisions concerning offences committed in contravention of the Bill.

Finally, sections 138 to 141, inclusive, set out certain miscellaneous provisions, including the formula for calculating interest on unpaid contributions, how the authority may apply for a court order for an employer or employee to pay arrears of contributions, as the case may be, and other provisions regarding moneys owed to the authority.

I thank Deputies for their patience. I always find that going through a Bill section by section is tedious, particularly in this case when there are over 140 sections to be covered. This in itself shows the scale of the work that has been required to get this legislation to this point. I strongly believe that auto-enrolment will be a transformative scheme for our people. When implemented, the new scheme will ensure that every employee will have access to a system that will enable them to build retirement savings in order to sustain their standard of living after their long years working in paid employment.

In the context of discussions surrounding the cost of business, I recognise that employers should be able to plan ahead and budget for the introduction of auto-enrolment, and I appreciate the concerns of employers in this regard. To this end, I assure them and Deputies that significant consideration has been given to feedback from stakeholders on these issues. In particular, as I have said, the design of the auto-enrolment system now provides for phasing in of the contribution rates over a decade rather than over six years as was previously planned. For employers, this approach gives very clear certainty as to the rates that will be applicable so as to facilitate the gradual absorption of these labour costs, thereby easing the burden on employers in implementing this reform. Moreover, most employers will be spared any real administrative burden because the Government has decided to set up a national automatic enrolment retirement savings authority, which will undertake most of the administration of the new system. This represents a significantly lower administrative burden for employers, in terms of both cost and resources, than operating an alternative pension scheme. It is also considerably lower than the administrative burden that auto-enrolment systems in other jurisdictions impose.

The introduction of auto-enrolment has been a key priority for me since my appointment as Minister, and I am delighted to finally bring this Bill before the House today. Ireland has been waiting decades for auto-enrolment. We are at full employment and the economy is performing well. Now is the time to press ahead and deliver auto-enrolment. The 800,000 people who currently have no occupational pension cannot afford for us to wait any longer. Every country that his introduced automatic enrolment has reaped the benefits. If people have more money in their retirement, that is good for businesses, good for the economy and, ultimately, good for society. I commend the Bill to the House and I look forward to hearing Deputies' contributions.

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