Matt Shanahan (Waterford, Independent) | Oireachtas source

I do not propose to use the full time allotted to me. My colleague, Deputy Naughten, is the Chairperson of the Joint Committee on Social Protection, Community and Rural Development, and the Islands, and he will speak for 20 minutes later. He has a lot more detail than I have. Automatic enrolment seeks to address the present position of a pension coverage gap and will apply to all employees who meet an age criterion and certain other criteria but are not already a part of an occupational pension plan. It is proposed that contributions made by employees from their salaries will be matched by employers and the State. Workers will be automatically enrolled in the new pension scheme if they are aged between 23 and 60, are not part of a pension plan and earn more than €20,000 per year. The ethos is that with automatic enrolment, employees will have access to a workplace pension savings scheme that is co-funded by their employer and the State.

It is laudable, in the main, to capture those who are not making provision for retirement. However, auto-enrolment will be a significant addition to the payroll costs of businesses in 2025, particularly if there are further large adjustments to the national minimum wage, which the Government has signalled. Many services and businesses now have a labour cost that is in excess of 40% of their turnover and 40% of their revenue. That is particularly noticeable in childcare and nursing home businesses. It also applies to sections 38 and 39 operations. For businesses with fewer than 50 employees, this is going to be a significant cost. They will require further assistance from the Government to meet their auto-enrolment obligations. Perhaps this can be subvented by a lower future PRSI charge. That may be one of the accommodations the Government is considering as part of the small business support scheme or as a budget measure to be announced in September.

The other issue about the scheme referred to by Deputy Ó Cuív is the three different types of retirement savings funds, which I understand will be operated by private insurers who will make some kind of tender or proposal to Government, and they will be chosen as the management partners for these pension investment funds. Workers will be able to choose from a high-risk, medium-risk and low-risk investment strategy. Deputy Ó Cuív has pointed out the small amount of investment by pension funds in this country at the moment, and that is because of the size of our ISEQ. You do not get the movement in shares or the appreciation in values. That is why people go looking at funds in international markets at the moment, particularly in the US. There is also exchange trading and all the rest of it, and currency trading.

Trading could be very volatile, and I would caution that people who are getting into the higher-risk end of pension investment will want to know what they are getting into. It also begs a question with regard to self-administered pensions. Why is this not being addressed? Maybe it is, and maybe I or the Minister should talk to Deputy Naughten. On a self-administered pension, people would at least be able to make their own decisions but, as the Minister knows, that is not available to every employee. In fact, it is quite difficult, generally, for employees to set it up. There are caveats with regard to setting up a self-administered pension. My experience would tell me that if I was getting in with pension providers at a high risk with the fees and commissions they charge, I would probably try to manage it myself as best I could. Where we are with respect to that?

The Minister is setting up a new body to oversee all of this but Deputy Ó Cuív has raised a very important issue, which is the amount of pension investment that is going to leave these shores. We can all remember back to the SSIA scheme that Government introduced here in the pre-2000s. That was a very successful savings scheme that helped a lot of people to buy a house in the late 1990s. A lot of people availed of that scheme, where the Government basically gave them tax-free savings and contributed to their savings scheme at the end of it. It begs the question: should we have some caveats around the management of these pension funds? As Deputy Ó Cuív outlined, we should invest in our climate action strategy and environmental protection. We should also maybe try to grow Irish companies and allow them to scale by offering them investment, rather than basically sending money to competitors overseas. These are just some of the issues that are going to be raised.

I am interested in Deputy Naughten's contribution. He has a wider perspective on all of this. In principle, I welcome the idea of some type of auto-enrolment but it is another cost on small business just announced by Government. It cannot be just blithely introduced where Government has to, year-on-year, force employers to keep on contributing because it will come out of the other end of employment costs. That means it will hit the net income of people in terms of their take-home pay.

See this speech in context