Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 31: To ask the Minister for Social Protection the reason she will not conduct and publish a cost-benefit analysis of using the PRSI system not only to collect the auto-enrolment pension contributions that are proposed by the National Pensions Framework but also to manage that money and make payments rather than handing those responsibilities over to the private pension industry. [15459/11]

Joan Burton (Dublin West, Labour)
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Increasing pensions coverage, particular among the lower paid and those with gaps in their employment, is a priority for the Government. The introduction of an auto-enrolment system is one of the best ways in which we can do this. An inter-departmental group, chaired by the Department of Social Protection, is developing the legislative, regulatory and administrative infrastructure required to introduce a number of pension reforms in the national pensions framework, including auto-enrolment.

It is envisaged at this stage that contributions for an auto-enrolment system will be collected through the PRSI system. In developing the various aspects of the system, we will consider the costs and benefits associated with the options available.

There will be a limited number and limited types of funds available under the scheme. The Government will decide how these participating investment funds will be selected and managed. It is expected that a competitive process will be run by the State which will also ensure that charges are kept to a minimum. The competitive process will not necessarily be confined to the private sector. It could include State organisations such as the NTMA. No decision has been made as yet.

It is intended that the auto-enrolment scheme will be introduced in 2014, but only if it would be prudent given the economic conditions prevailing at that time.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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I thank the Minister for her answer, which goes beyond the answer I received to a written question I tabled recently. I welcome the fact that she said part of the State mechanism may be able to tender for this work. I do not think it should be limited to the NTMA, and the State itself should be involved to a greater degree.

Does the Minister agree that before the crash, and in spite of huge tax breaks, the private pensions industry failed completely to deliver an adequate income for the vast majority of the people who were reaching retirement age? Does she agree that the PRSI system has proved to be an effective and straightforward system in which the public can have confidence? Does she agree that it should be the system to deliver private pensions, beyond just collecting contributions?

Joan Burton (Dublin West, Labour)
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The evidence from other countries is that auto-enrolment is a very effective way of getting more workers to start providing for retirement pensions at an earlier age. There is very considerable merit in this system, but its introduction in 2014 will very much depend on the economic conditions at that stage.

Younger people are often focused on acquiring a house and other commitments, such as settling down in relationships and having children. However, time slips by for many workers who fail to become involved in pension provision and as they become older, they are seriously underprovided for. This is an issue for Irish society and the purpose of the auto-enrolment scheme is to assist that.

When the Deputy mentioned other institutions, I presume he was referring to An Post.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Yes.

Joan Burton (Dublin West, Labour)
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There are good models available and one of the best schemes that ever existed was the simple savings scheme with An Post. A person could basically save relatively small amounts of money for five years and get a return. This was dealt with in a very effective and comprehensive way. I acknowledge that An Post potentially would have a role to play in this, along with the NTMA. However, there would also be strong interest from private providers. At the end of the day, the advisory group currently working on this will provide the advice.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Can the Minister confirm that there is no preferred option at this stage? Without substantial changes to the private pensions industry, it should not be considered suitable, given that there is a need for greater transparency on costs. Up to 30% of a pensioner's lump sum is often swallowed up in charges. The return on private pension assets was recently only 1%, whereas the return from the An Post scheme is 3%. That would be a better model to follow when providing a second tier pension.

Joan Burton (Dublin West, Labour)
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The pensions industry is an important industry and employer in this country. It is a very important route for many people, providing for pensions through defined benefit and defined contribution schemes. The industry will continue to play an important role. That does not in any way prevent the existence of schemes being offered through State mechanisms such as the NTMA and An Post. We want schemes that will afford the maximum take up at the most reasonable cost to the highest amount of workers from as early in their working life as they are willing to start thinking about providing for a pension. That would leave us all in a happier position.