Dara Calleary (Mayo, Fianna Fail)

I thank the Ceann Comhairle, the Business Committee and the Chief Whip, the Minister of State, Deputy Butler, for giving us the opportunity to discuss auto-enrolment today. There are specific worries I will engage with Deputies on over the coming days, to answer queries.

I welcome the support for the overall concept of a pensions auto-enrolment system. The aim of introducing auto-enrolment is to once and for all solve the pension coverage gap that exists in Ireland, and to provide for better retirement incomes for workers in the long term.

One of the key points raised today is the potential burden on employers that is being associated with auto-enrolment. First, the establishment of NAERSA ensures that the administrative burden will be minimised, particularly as the scheme rolls on. There will be some burden in the initial stages of inputting the information and giving it to NAERSA but those employers who have payroll providers who do that for them will be able to work with them. The work of NAERSA will then ensure that the ongoing administrative burden will be absolutely minimised.

Second, to come to a point raised by an Teachta Ó Muirí with regard to fees, one of the things we have found during the procurement process for the investment managers is that by going to the market with 800,000 potential pension holders, as opposed to each of those 800,000 potentially going individually, we have considerably reduced the administration fees that otherwise would have been charged. I also picked up the Deputy's points with regard to the excitement of the scheme or otherwise. There are high-risk options available to younger savers, with medium risk and lower risk as you advance in age and come closer to retirement. The option is there for people to go for higher-risk investments and that is one of the reasons we went to an open procurement system for investment advisers. Some people say this could have been done by the NTMA but giving options and lower fees to savers was a key issue.

I wish to remind Deputies that on the design of My Future Fund, which has been referred to, I will re-emphasise that the phasing-in of contribution rates will happen over the course of a decade, starting at a very low 1.5% of gross pay for the first three years and gradually rising to 6%. For the employer, 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, which will ease the burden on those employers in implementing this crucial return.

I understand about the costs. There is a never a good time to add a cost but we have to grasp this nettle once and for all. We are the last country in the OECD to introduce an automatic enrolment scheme. Right now, we have four workers for every person over the age of 66 in this country. By the time we get to 2050, which is not that long away, we will have two workers for every person over the age of 66. I understand, and I want to re-emphasise to Deputy Nolan that the non-contributory State pension will still be the bedrock of our pension system. Auto-enrolment is not meant to displace those contributions and services. I will also respond with regard to her specific query.

Deputy Lawless mentioned the self-employed, and we have introduced pension options with extra contributions for the self-employed in recent years. We will continue to increase the supports available to self-employed people through the social protection system over the course of this Government and beyond.

I would also point out that for any employer who cannot offer an occupational pension at the moment, auto-enrolment and My Future Fund will create a more level playing field for them with regard to trying to attract good workers in what is a very tight jobs market. Moreover, employers will benefit from participating in My Future Fund by enhancing their employees' sense of well-being with regard to them having some security with respect to their post-employment retirement. ESRI research indicates that over the longer term, auto-enrolment will be good for the economy and retired people will have more disposable income than they would have had otherwise. In turn, this will sustain consumer demand and business revenue as that population ageing happens.

A number of Deputies have asked us about monitoring. This will be subject to monitoring by the Pensions Commission and the Financial Services Ombudsman, so there will be external monitoring. NAERSA is statutorily independent of the Oireachtas, and I have appointed a very strong and experienced board to ensure the initial stages of auto-enrolment are led by a board and executive team who have experience, strength and who, in particular, have experience of the introduction of complex projects. I think the board reflects that. The level of interest in being on the board and in applying for the staff positions in NAERSA gives Deputies an indication of the overall interest in auto-enrolment and, in particular, the overall interest in the success of auto-enrolment.

Many Deputies raised issues around the values of the investment portfolio. While all investments have to be made in accordance with the prudent person role and in the best long-term interests of each of the participants in the scheme, each investment strategy will have specific environmental, social and governance, ESG, requirements. That is laid out in sections 74 and 75 of the Act. Section 74 requires the investment management providers to take into account the long-term impact of investment decisions on environmental, social and governance factors. Section 75 of the legislation is also of particular note, as it provides for a number of provisions that must be included in the contracts we are currently concluding with the investment management providers. These include that any investment management service providers must make a provision in their risk management system to take account of the risks that arise through environmental, social and governance factors; that they must conduct, at intervals of not more than three years, an assessment of the risks that arise from environmental, social and governance factors, and report to NAERSA on that assessment; and prepare, and from time to time revise, a statement describing how considerations arising from ESG factors would affect the investment decisions. In the future, consideration may be given by the board of NAERSA to expand investment options as part of the review of the system, which is required by section 43 of the legislation. This is in line with the typical trajectory of how retirement savings providers develop, whereby they generally start off with a limited number of investment options and gradually expand to alternative offerings once their asset base is sufficiently developed.

Much of this, a Cheann Comhairle, is technical. Much of it might seem inaccessible but it is a hugely important policy. Over the coming weeks and months we will be ramming home the communications on this. I have picked up from many Deputies today the concerns that many employers are saying they have not heard. We will work with NAERSA, Revenue and colleagues in payroll across the system to ensure that communication gets in, and that it will get to workers. Yes, there will be a deduction in their take-home wages but that is a deduction that is being made in the best interests of their future, a future post retirement, and their living standards post retirement. By taking part in My Future Fund they are making an investment in that future, which will pay back to them in the years to come.

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