Heather Humphreys (Cavan-Monaghan, Fine Gael)
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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.

Donnchadh Ó Laoghaire (Cork South Central, Sinn Fein)
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Auto-enrolment has been discussed for a lengthy period and, in principle, it is something my party supports and has argued for. However, we are not satisfied with the structure outlined in the Bill. Consequently, we will not be supporting the legislation on this Stage. If substantial changes are made during its passage, we will consider doing so on a later Stage. In principle, auto-enrolment is necessary because many workers, unfortunately, do not have adequate pensions to see them through their retirement. Increasingly, and I think the minds of the members of Government may have been concentrated by this, we are seeing more and more people as they approach pensionable age and their retirement finding themselves in more precarious situations than previous generations. Many are renting, and that number is only going to increase. The general assumption underpinning the State's pensions has been that by the time people reached pension age, their accommodation had been settled, whether they were paying a local authority or differential rents or had paid off their mortgages. This is no longer a safe assumption. Unfortunately, more and more older people are finding themselves in precarious situations because of the mishandling of the housing crisis by this Government and previous Governments.

More generally, there is a huge reliance on the bedrock of the State pension, which want to see strengthened. We also want to see a greater contribution to allow more people to be in a secure position and, therefore, we support the principle of auto-enrolment, as our previous spokespersons in this area, Deputies John Brady and Claire Kerrane, outlined. We have two primary difficulties with the legislation. It is our view, fundamentally, that if we are going to develop a new stream of pensions, any framework the Government is trying to establish needs to be built on strong foundations. We are concerned that the foundations this Government is relying on, namely, private funds, are not strong. We are concerned that this approach will be a gift to the private pensions industry and we will face significant risks for many workers who will rely on the auto-enrolment schemes in future.

Not long ago, during the Celtic tiger years, many people found that the pensions they had been paying into for a long time, whether defined benefit or, more typically, defined contribution, were not worth anything like what they had imagined them to be worth. Many people then had to keep on working for longer and make different decisions in terms of their accommodation. Many people also had to remortgage. Difficult decisions were made during the Celtic tiger years because people were let down by private pension funds. That is not a strong foundation on which to build the auto-enrolment scheme.

We have outlined our views on how auto-enrolment should be structured for some time. I refer to our submission in response to the Minister's strawman document. I am sure she has received it and is aware of what we said in it. This was an essential element of our views and concerns. It is our view that the fund we are talking about, which will be worth an enormous sum, should be managed robustly and with the certainty of an adequate and worthwhile pension in retirement. That must be guaranteed. The very least citizens should be assured of is the secure management of their pension savings. As I said, the financial crash saw many members of defined pension schemes left at the mercy of the markets. That type of an approach to auto-enrolment would put pension funds at risk and would not ensure an adequate supplementary pension in retirement. We do not wish to see the private pension sector being gifted the hard-earned savings of Irish workers to increase its profits through substantial fees. We are opposed to workers' savings being used to shore up private providers operating on the basis of profit.

Our very strong preference is that the NTMA, which is already responsible for managing a number of funds, including some recently announced by the Government, would be responsible for managing these funds and investing them to the benefit of citizens. Rather than focusing on its own profits, the NTMA would prioritise the financial well-being of citizens' contributions to ensure their comfort in their old age. It could also ensure that money in the fund is put to work for Ireland, and the interests of the State and our people, by investing in green energy, housing projects and other worthwhile secure investments. Instead, under this proposal, contributions will be collected and handed over to the private pension industry. That is the primary concern we have with the Bill.

It is also worth noting that we are in the middle of a cost-of-living crisis. We agree in principle with people being auto-enrolled in a pension scheme. However, people will not have the option to opt out for six months, which is a substantial period. Those on €20,000 will pay €5.76 a week, or between €20 and €30 a month. If people are looking at their last €20 or €30 at the end of the month as the bills come in for their electricity, gas, rent, mortgage and so on, that amount could make a substantial difference. I appreciate that people have the option to opt out, but in the middle of a cost-of-living crisis the fact that people may potentially have to wait six months to opt out is challenging for these workers. We have a concern in this regard also.

The Minister and I have had several exchanges on the right to retire at 65. During our last couple of exchanges, I welcomed some of the Minister's comments because she did not indicate any principled objection to it. She pointed to the transitional payment and I pointed out this was a difficulty for a variety of reasons. The Minister did not point to any financial obstacle and said she would consider it. I welcomed that she seemed to take a less rigid position than her predecessor on the right to retire at 65. However, the Government has not moved on the issue, as it should. People should be entitled to retire at 65 after decades of work. Many of the people contemplating doing so will have been working on their feet for long days from the age of 15, whether as home helps or cleaners or in the trades. Having worked hard, they may potentially have to sign on the dole or continue to work beyond the age of 65. There should be a right to retire at that age and that is the view of many people. The Government has not moved on the issue. The Minister has said she would consider it. I urge her again to continue to consider it if she has been considering it. It is the least that people who have been working for many years deserve.

Coming back to the specific proposal at hand, there is no doubt that we are looking at a changing landscape for workers compared to ten or 20 years ago. The cost-of-living crisis has a major impact on the amount of money that workers can afford to set aside for a pension. We can no longer assume that people will own their homes when they retire. This means that an adequate pension that can cover real costs, including, potentially, the cost of a mortgage or rent into retirement, will be crucial.

We support the general principle of auto-enrolment. If substantial changes are made in the legislation and to the structure in question, we would reconsider our position. Right now, though, we are not satisfied that this house is being built on solid foundations. We believe there is a much better way to do this with the NTMA and it is to a body such as that we should be entrusting our workers' pension contributions. It is for this reason that we are not supporting the legislation at this point.

Louise O'Reilly (Dublin Fingal, Sinn Fein)
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I am thankful for the opportunity to make a contribution. Sinn Féin supports the overall idea of auto-enrolment. We have consistently advocated for the introduction of a fit-for-purpose auto-enrolment scheme. In this State, we are very late to this type of pensions policy, as the Minister acknowledged. It is essential, however, that an undertaking as significant as this is done right. It is extremely unfortunate that this legislation has not been done right. It does not follow best practice. It does not ensure the highest protection for the contributions of ordinary workers and it outsources what should be managed by the NTMA to the private sector. This is not, therefore, legislation that we can support in its current format.

The refusal to allow low-paid workers to opt out in the first instance and, thereafter, to deny them the ability to claim back their money for half a year is not fair or practical. It begs the question as to whether any low-paid workers were consulted on or made a contribution to the design of this policy.

A worker earning €20,000 a year would be down up to €30 a month. While there may be some who will scoff and sneer that this amount is insignificant, I can tell the Minister that a visit to any constituency office in the State would reinforce the notion that such an amount is the difference between being able to provide school lunches for children or keep the electricity on.

At a time of a cost-of-living crisis we do not believe that the mandatory engagement of the scheme for people for a full six months is the correct approach, in particular for those on low incomes. People should have autonomy to leave if they wish and they should be trusted to be able to make the decisions that are best for them and for their family. There is a big difference between what someone earning €20,000 a year and what someone earning €70,000 a year can afford to put by each week. The key thing is that people should be auto-enrolled but they should be able to leave without too much delay or hassle. This is another example of poor judgment by this Government thinking that it knows what is best without consulting or understanding the circumstances of ordinary workers and their families.

A second concern is one we have raised on several occasions, which is how the pension fund will be managed. We have concerns about the fund being managed privately instead of managed by the NTMA. As the NTMA already provides a range of asset and liability management services to Government, it really beggars belief that it has not been allocated the management of pension auto-enrolment. This is vintage Fine Gael - outsource to the private sector regardless of the consequences. Low-income workers will be at the business end of this. My colleague, an Teachta Ó Laoghaire referenced the financial crash. I was working as a full-time trade union organiser at the time of that financial crash. I sat with workers from large companies whose pensions had been absolutely decimated. Grown men in their 50s and 60s were sobbing their hearts out because the private sector had simply squandered their hard-earned savings. They were facing the dole office for a year as introduced by a previous Government and then the State pension. They had saved and had made those sacrifices. That was money that was not available to them or their families and it was absolutely and recklessly squandered. If the Minister wants to consult with them, I am sure they would be more than happy to meet her. They will tell her what the private sector companies did and how little concern they had for those pensions of workers who had saved for what they thought would be a comfortable retirement.

Since 2018 Sinn Féin has consistently proposed that the State should play a leading role at the heart of the auto-enrolment scheme and we had proposed that the NTMA would be central to this in managing these funds and investing them to the benefit of citizens. Rather than focusing on its own profits, the NTMA would prioritise the financial well-being of citizens' contributions to ensure their comfort in their old age. It could also ensure that money in the fund just put to work for Ireland, such as new knowledge-intensive sectors, green energy and indeed housing projects. We have seen the impact of previous pension disasters as has been the case with DC on DB pension schemes where workers were left at the mercy of the market. These people would be happy to meet the Minister and explain to her why this is the wrong approach. They were left extremely vulnerable with employers able to walk away in some instances.

We firmly believe that the Government must ensure the robust management of this fund to ensure that employees are protected. This has not been done and instead workers' hard-earned contributions will be collected and handed over to the private pension industry. We cannot accept this and we will not support it. It is extremely important that we get auto-enrolment right it if it is to reward workers and greatly improve their lives post retirement. Therefore, we believe the NTMA should be responsible for managing the funds and that people, especially those on low incomes, should have a right to a swift opt-out if they are under financial pressure.

We should not lose sight of the reason we are here. The previous Taoiseach spoke about the social contract and how that social contract had been breached. One of the ways that the social contract has been breached is the manner in which people who have worked all their life who should be in a position to own their own home have been locked out of home ownership by this Government and successive Government policies. The Government is now telling them that they had better make provision for their retirement because they will be paying rents until they no longer need somewhere to live. That is why we are here. It is not out of any concern or care for low-income workers. We know why we are here. We will not support the handover of large portions of people's hard-earned savings to the private sector because we have seen what happened previously.

Denise Mitchell (Dublin Bay North, Sinn Fein)
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The issue of pensions has been discussed for a long time and the Government has now got around to publishing its plan, following on from the initial submissions that were sought for years ago. The Government is trying to address the fact that Ireland is the only state in the OECD without a pension saving scheme for workers after 25 years of its being talked about. However, we need legislation that is fair and equitable to ensure that pensions are secured for future generations. Unfortunately, this is a missed opportunity and we in Sinn Féin cannot support this Bill for a number of reasons. The first reason is that the Bill will lock low-paid workers into a scheme for the first six months, meaning that they have no choice but to tighten their already tight belts until the six months have passed where then they will be able to opt out. That is unfair on those who are struggling to make ends meet. The reality is that many people live week to week, but this Bill completely ignores that fact. The cost of living may feel like it has abated for those on higher incomes but many are still living on the breadline and that reality cannot be dismissed. The Bill assumes that they can afford to go without €20 or €30 of their income for six months but we know that many simply cannot.

The Government has indicated that the Pensions Authority will supervise the scheme. We have concerns that this scheme may involve the private pension industry. In our submission back in 2018 we proposed that the State play a lead role and that the NTMA would be central to this in managing these funds and investing them for the benefit of its citizens. We still believe that this is the best way forward. The NTMA would be best placed as it would prioritise the financial well-being of citizens into the future.

Employees and the protection of employees must be a central concern throughout this whole process but unfortunately that spirit is not reflected in this legislation.

We have all seen the impact of previous pension disasters on workers cannot be left in the hands of the free market. It is important that workers have faith in the system before it gets off the ground. A pension is something people rightly hold dear. It is their future and their security. It allows people to retire after decades of hard work and allows them to maintain their standard of living so they can enjoy the later years of life.

What we are discussing is fundamental reform of how pensions work. It is a missed opportunity on the part of the Government not to safeguard low-paid workers. The Government needs to listen to the criticism coming from the Opposition and go back to the drawing board on this issue. That is why we cannot support the Bill as it stands.

Duncan Smith (Dublin Fingal, Labour)
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Auto-enrolment is an issue that has long been talked about. We are glad that we now have a Bill before us. We have reservations about some aspects of the more detailed elements but broadly speaking are supportive of its provisions. The impetus behind auto-enrolment is to address the pension coverage gap and to take steps towards improving the financial security of people in retirement. This aim is to be welcomed. The 2022 census data shows that about 20% of those beyond retirement age live in relative income poverty. That is around 145,000 pensioners who represent just over a fifth of the total population living in poverty, second by age cohort only to children. Auto-enrolment could prove a significant step in addressing that level of poverty in retirement if it is done correctly.

Those workers who do not have an occupational pension scheme and who cannot afford private pensions, face an obvious income cliff edge when they retire. Reliance on the State pension as a sole source of income will result in a huge drop in both income and general living standards for many in retirement. At present Ireland is the only OECD country not to have some form of mandatory pay-related retirement savings mechanism. Ours is the only country that outside the State pension relies on a more or less voluntary approach to pension savings.

It is not unreasonable to conclude that this approach has failed. We would not be here talking about this nor would we have been talking about it for the past number of years if we had not reached that conclusion already. We have never really reached widespread pension coverage under the voluntary system. Approximately two thirds of workers are covered outside of the State pension, be it through an occupational scheme or a private scheme. There means one third of workers are not and who will be relying solely on the State pension. That is far too many to be left behind. We are talking about equity here as much as we are talking about anything else. Workers should not have to get lucky with that their employer offered an occupational scheme nor should the other option of a private pension be the preserve of those only on good incomes. It is notable according to Central Statistics CSO data that more than four in ten workers cited affordability as the main reason they do not have a supplementary pension.

We need to recognise as well that those private or occupational pensions are receiving a benefit from the State through tax incentives that are not being afforded to those without them. This is effectively denying people on low income a State benefit because they do not have the luxury of an occupational pension. It is not that we believe occupational pensions should be a luxury, or the ability to be able to afford a private pension. We can see that those in what we traditionally classify as low-paid jobs are among the lowest for coverage. For example, in the hospitality and accommodation sector, only 32% of workers have some form of supplementary pension whereas those classified as professionals have a coverage rate of 83%. It is obvious that those tax incentives have failed to attract a sufficient number of low and middle income earners to these types of schemes. I am glad that we are introducing a form of mandatory retirement savings.

It is clear, not just that we need to increase coverage generally, particularly for those in low-paid jobs, but that the voluntary system itself has failed. In fact, it discriminates against those in such roles and it is crucial when this new system is operational that workers on the auto-enrolment scheme are treated equally in tax benefits. It is our hope and our belief in the Labour Party that the system of auto-enrolment will improve coverage, particularly for those on those low incomes and address the income inadequacy in retirement.

The proof will be in the pudding when we look to other countries that have introduced it. Since our next door neighbours brought in auto-enrolment in 2012, pension coverage has increased from 47% to 78% and their pension landscape has changed massively. In the ten years or so since it became operational, it narrowed the enrolment gap across incomes, occupations and age groups. In real terms, total pension savings have increased and many employers go beyond the stipulated minimum contribution rates Similarly, New Zealand's KiwiSaver's scheme has achieved some 80% of coverage. A report from the UK scheme released recently highlights the successes in addressing the pension gap but it also provides some suggestions we would do well to learn from here before we begin our scheme and I will come back to that.

Before moving on to the particulars of the Bill itself I want to briefly make general points on the State pension and its relationship with the new auto-enrolment scheme.

First, I would welcome from the Minister an assurance that there will be safeguards put in place that will ensure that this new retirement savings scheme will be in addition to the State pension so that at no point can some future government unilaterally decide to make it a replacement. We also need assurances that the Government remains committed to achieving a benchmark of 34% of gross average earnings for the contributory State pension, as set out in the roadmap for pensions reform. I hope this new measure, welcome as it is, is not used as a distraction from that ambition. At present, we are still a significant distance away from that target. The kites have already been flying for what would be this Government's final budget so we might see in the coming weeks and months whetter Government intends to follow through with on that ambition.

Second, I would also appreciate an assurance for workers from the Minister that those contributing to the new scheme will not face a means test for the State pension in the future. Safeguards must be put in place in that respect also.

All that being said, we are broadly supportive of the principles of auto-enrolment and are optimistic about its potential to bridge the pension gap, increase workers' pension coverage and reduce and prevent old-age poverty but we have reservations about some of the details in the Bill. The point was made by the Irish Congress of the Trade Unions, ICTU, that there is a loophole in the Bill that could see employers getting away with not making contributions to employee's pension for a number of years if that employee already has a personal retirement savings account, PRSA. The seven-year period before an employer has to make contributions needs to be significantly shortened. It is effectively punishing employees who try to be proactive and set up a PRSA for retirement for savings.

Similarly, we join with ICTU in calling for stringent protections against employers using the new scheme to dilute the existing pension arrangements that workers might have through occupational schemes. We cannot have a situation where existing employer contribution rates are decreased in cases where the auto-enrolment rates are lower. Protections must also put in place to prevent employers from closing off occupational schemes and their contribution to new hires.

We also have concerns around the rules for self-employed people. Bogus self-employment is rife in Ireland and I am concerned that this mechanism will be used by employers to exacerbate the issue. I am sure many of us have met workers from RTÉ in the past year who were placed on bogus self employment contracts and have been left without a pension. We do not want to create a financial incentive for employers to put workers on the same sort of contract to avoid having to make contributions to the auto-enrolment scheme. There is already a low level of coverage among self-employed workers so the Labour Party is of the position that they should be automatically enrolled and that the businesses they are providing services to would be liable for employer contributions.

I fail to see the rationale behind the minimum age threshold for inclusion in the scheme. The minimum age threshold for PRSI payments is 16. Young workers are some of the most exploited in the country and it seems deeply unfair to me that they would be excluded. At seven years, from when a young worker begins working and when they are included, is not an insignificant amount of time that somebody could save for a more financially secure retirement. The age threshold for inclusion in the scheme should be aligned with that for PRSI payments.

On the operational element of the scheme, particularly with respect to the pension investment fund provided, it needs to be careful to ensure that people can have confidence in the scheme. The Bill establishes a new body to administer the system, the national automatic enrolment retirement savings authority, and that this new body will put out a tender for providers. We would welcome from the Minister details on what the parameters for consideration to be awarded a contract would be. We do, however, welcome that the board of the new body will include worker representation.

It is important to remember, however, and it is not unfair to say, that people in Ireland are generally suspicious of financial institutions given our own recent history. Members of defined contribution pension schemes were completely shafted during the financial crash. People need to be assured that their pensions are secure and that they are being properly managed. The national automatic enrolment retirement savings authority is a positive provision in that regard but will need strong legislative underpinnings to ensure people can have those assurances and the confidence that their funds are protected from mismanagement. A good start to get people to buy into the system and to give that bit of confidence a boost would be to lower the annual management fee. The current 0.5% fee seems excessive to me and will be perceived as such. Trust between the public and financial institutions has been damaged and if this scheme is to be successful, people cannot feel that they are being fleeced by pension providers and investment funds from the get-go.

There are other elements that we have a particular view on but we make back to them on Committee Stage. We will reserve the right to make amendments on that and other issues I have raised today in due course. In general, however, we are supportive of this Bill. We can see the benefits when look to other countries such as New Zealand or Australia that have introduced similar schemes. They have seen a transformative impact in pension coverage on the back of auto-enrolment and we hope we can achieve the same result here. We have to get this right. It has been a long time coming and I want to see it work. We will work collaboratively with the Minister, the Government and other Opposition parties in that regard.

Marc Ó Cathasaigh (Waterford, Green Party)
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I welcome the Bill. It was a key recommendation of the OECD's review of the Irish pension system that we had to increase that supplemental pension coverage. That word "supplemental" is important. Deputy Duncan Smith alluded to it but I do not believe it is within our compass to make any promises about future governments, however. The system is designed to be supplemental and it does not in any way, shape or form reduce the responsibility of the State. What we are talking about here is providing a minimum floor, which is what the State pension is designed to do, as opposed to income adequacy or a replacement rate of income. That is what we are hoping to do here under the AE system.

Under AE, employees will have access to workplace pensions, a savings system scheme co-funded by the employee, the employer and the State, and it is a response to 25 years of inaction, as outlined by the Minister, but also to the demographic challenges that were outlined in very clear-eyed terms by the Commission on Pensions, which the Joint Committee on Social Protection, Community and Rural Development and the Islands scrutinised in some detail. This is a job of work that needs doing because, as the Minister outlined, two thirds of people in the private sector do not have private pension provision. That is 800,000 people who, when they come to retirement, will face a cliff edge in their incomes.

The joint committee, of which I am the Leas-Chathaoirleach, put a considerable amount of work into the pre-legislative scrutiny of this legislation. We had six individual sessions meeting with groups such as ICTU, Irish Life Assurance plc, Pensions Authority, Irish Business and Employers Confederation, Insurance Ireland, ESRI and, of course, officials from the Minister's Department.

It was a considerable piece of work because we knew that it was very important legislation. I am somewhat disappointed to note from analysis done by the Library and Research Service that of the 21 recommendations that were put forward by the Oireachtas joint committee, only two have been accepted in full, six have been accepted in part or are reflected in the current draft of the Bill and 13 have not been accepted either in full or in part. We did not make any of those recommendations willy-nilly; a considerable amount of work was done on this. I am therefore disappointed in terms of not only the work we do as a committee but also the inputs we get from civil society groups and the wider sector when we ask them as a committee to come in to speak to us about the contents of a Bill. It is difficult to make the case that they should take that type of engagement at pre-legislative scrutiny stage seriously when so few of the recommendations are accepted.

I am a little nonplussed by the Sinn Féin criticism of the Bill. We did speak in committee about the potential of the role of the NTMA. It is difficult to know whether the NTMA would in fact have the capacity to do what Sinn Féin speaks about. I do not quite see how it is a protection because even if the NTMA were to act as the intermediary, it would still be investing in the private sector. How that would insulate that investment from shocks within the wider investment system is unclear to me. Perhaps Deputy Ó Laoghaire would like to send me on the document he spoke about in his contribution.

I, however, will focus in on one specific provision, or lack thereof, within the Bill. This is one of the recommendations we made as an Oireachtas joint committee and it is about the key issue of what the money can be invested in. As regards the feedback we have on that recommendation, I refer to a Library and Research Service document on this. It is important to note that the NAERSA - I am sure we will have to come up with a better name for that at some point - will not be administering a new State fund but, rather, will be administering hundreds of thousands of individual savings accounts that will be the personal property of the AE participants. This is with regard to our recommendation that investment funds be prohibited from investing either in fossil fuels or in the arms industry. These are, of course, individual pension pots, but I disagree that the State does not have a responsibility to respond to the responsibility that comes with that level of investment. The State will make a significant amount available for this pension provision into the future and, along with that money, our values, the values of the State, should be reflected in that.

It would not be the only time the State does something like that. We have frameworks for responsible investing already in place at scale. That is included as part of balancing hedge portfolios. For example, ISIF has divested from several areas, such as cluster munitions, tobacco manufacturing and nuclear weapons. Basically, we do not want Irish money involved in those types of investments. The Fossil Fuel Divestment Act also prohibits ISIF from investing in companies that derive more than 20% of their turnover from the extraction, exploration or refinement of fossil fuels - the likes of coal, oil, gas and so on. We have a structure within the NTMA. The Irish sovereign green bonds working group, with a wide membership of the NTMA and several Departments, came up with a framework for investment with six eligible green categories set out in the ISGB framework. I will not go into them in that kind of detail but I do feel strongly that while we have written ESG considerations into this Bill to the effect that it should have regard to climate and other frameworks, we need to make it explicit within the Bill that a considerable amount of Irish money will be put into this on behalf of the Irish Government and that there should be restrictions as to where this money can be invested. If we have a number of pension pots, that is, if we have that low risk, medium risk and high risk, then let us define one of them whereby we have this kind of ESG or this divestment characteristic and make it the default. We know from international evidence that most people defaulting into this will come in through auto-enrolment and will stay in the one place. Let us try to reflect the values we hold as a nation in the way we invest our money. I strongly feel that we should include that in this legislation.

Martin Browne (Tipperary, Sinn Fein)
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We are living in an ageing society, and it is important we get auto-enrolment right. It is important to provide a financial vehicle to help people to supplement the State pension to enable them greater financial security in retirement, so we must get it right. It is to reward workers and improve their lives post retirement.

I refer to the mandatory nature of the automatic opt-in for six months. As devised, this Bill gives little recognition to the challenges faced by people on lower incomes, especially when the high cost of living gives those workers little room to manoeuvre financially. We have to recognise what this means for people on around €20,000 a year. If this Bill were to take effect, it would result in a deduction from their pay of €5.76 a week, so they would be left with no choice but to bear a deduction in their incomes of between €20 to €30 a month for six months before they could opt out, regardless of whether they could afford it. For families living from paycheck to paycheck and at the pin of their collars to make ends meet, this fails to recognise their situation and forces this deduction on them for six months without giving them the autonomy to make their own decisions. People know what is best for them in their individual situations, and it is not for the Government to dictate that they should be locked in for six months. People should be auto-enrolled but they should also be able to leave if they want with as little delay or hassle as possible.

The Bill does not provide for the payment of a State incentive during periods of maternity leave or for a mechanism to make additional voluntary contributions by partners. While I note this may be facilitated once the system is bedded in, we are being asked to act on blind faith. Credits are also not provided during caring, which needs addressing.

Finally, the way the fund would be managed is troubling. For years we have laid out our opposition to private pension providers being responsible for this investment. Back in 2018, we advocated for the NTMA being central to managing these funds for the benefit of citizens and to prioritise their financial well-being rather than gifting this to private pension providers, which ultimately have a different set of priorities. I support the introduction of auto-enrolment but not as set out here. It is too important to take any chances with, and I feel that, as it is currently set out, the risk is too great.

Gary Gannon (Dublin Central, Social Democrats)
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I am grateful for the opportunity to make some points on this Bill and our pension system more generally. I do not want to come across as if I am suggesting that auto-enrolment is without benefit. Many hardworking people with no pension savings will be saving for the first time and will be better off as a result.

Overall, however, I wonder about the repercussions. How does this contribute to things like a decent income for all older people, alleviating poverty for our elderly or financial sustainability for the State? The debate should not be just about the effect for a few individuals who stand to gain a bit from being enrolled in a pension scheme but for all our society. There are plenty of positives in how the Minister and the Department are planning to structure this that we did not expect to be the case when we started this initiative. The central process and authority that will manage contributions have the potential to provide better value and the potential for better long-term returns than would be the case if some firm from the pension industry had been given the job of managing the system for what would no doubt have been a very substantial fee. That is really positive to see.

There are also some problems, some of which have been raised. I will highlight my concerns with them. For people on low incomes, is there any need to be making pension savings given that the State pension will replace a large portion of their income? Is there any sense in trying to enrol someone earning €25,000, for example? Why are the newly enrolled or auto-enrolment people being given more favourable support than some people already in the system? Certainly, having two parallel systems of pension tax relief is not equitable. Different taxpayers get different benefits, and for some taxpayers this new system may be more beneficial than their current workplace pension scheme. The Commission on Taxation and Welfare recommended equalisation of tax relief for pension contributions for reasons of equity, but instead a third rate is being added. This complicates matters unnecessarily. Add to that the fact that the earnings threshold for auto-enrolment of €80,000 is different from the current system's €115,000. I think €115,000 is far too high but, again, I do not see the justification for two different rates.

For drawdown at retirement, some account could be taken of some employees who may have arduous or hazardous jobs. A proportion of the fund should be made available at an earlier age for people who, for example, may be in their 50s but have spent their whole lives being blocklayers. I would also have liked the option of a public investment fund to act as a registered provider. The NTMA could have provided a public investment fund in which members could choose to invest some of their contributions or, perhaps, all of the State's top-up contributions could have been allocated for this fund. This could be used to invest on a commercial basis in a way that supports economic activity and employment in the State, perhaps in the area of green energy or housing projects, that is, things that would make this a better country to live in long into the future. Other countries have mechanisms to direct savings towards investments with social gains. We need to look at this too. I also see a need for the ongoing monitoring of employees and how they adapt to the new scheme. From an employer perspective, the increased cost of auto-enrolment could be an incentive to encourage employees to become self-employed or encourage them to opt out of the system. Those are some of the concerns I have.

I have a few things to say about the whole principle of auto-enrolment and, more generally, the principle of how we support pension savings and why. What are we getting from this? What do we want to achieve with this big new departure in our pension scheme? Typically, the argument in favour of auto-enrolment revolves around the need to encourage retirement savings. The arguments most often given as to why we would want to incentivise pension savings usually involve two ideas. They are the need for people to have a reasonable continuation of their standard of living once they retire and the need to reduce the long-term financial burden on the State. I will look at each of these two ideas in turn. First is the idea that auto-enrolment is needed to help maintain living standards in retirement. Of course, this sounds like a fine idea and is very difficult to argue against. The idea that people do not want to see a big drop in their incomes when they retire or that they want to maintain a relatively consistent level of spending in old age is not a new one. There are all these policy initiatives and expensive tax reliefs aimed at getting people saving in order that they can get a certain percentage of their income while they are working. However, annuities are expensive, as we know, and the vast majority, even those saving loads, never manage to save enough in a defined contribution scheme to get close to half of their pre-retirement income. For the majority, the State pension will always be their main source of income in retirement. Meanwhile, research by TILDA, which does longitudinal ageing studies in Trinity College Dublin, suggests that "Retirement income replacement rates are [generally] not associated with quality of life [after] retirement." Instead, it found that it was actual income in retirement, not the proportionate change in someone's income when retired, that affected quality of life the most. TILDA found that all aspects of quality of life, including control, autonomy, self-realisation and pleasure, all increased consistently with household income. The emphasis I need to make again is that it is actual income that is important, not the proportion of your pre-retirement income. The proportion of your pre-retirement income no doubt has some effect but does not seem to be the most important thing for most people. This suggests to me that policies aimed at achieving a certain rate of replacement of pre-retirement income should not be given as much priority as policies looking to achieve a minimum income floor for retirees. That minimum floor is something the State pension, not private pension savings, is best positioned to provide.

The other argument given on the need for auto-enrolment is the need to reduce the long-term financial burden on the State. This is the argument most often given in its favour and also in favour of other incentives to increase private pension savings. We have heard it in a multitude of different forms but it usually sounds something like the following. First, the number of older people in our society is increasing. Second, the ratio of workers to pensioners is going to fall significantly in the coming decades. Third, as a result, the cost of the State pension will become unsustainable and, fourth, automatic enrolment is part of the strategy for reducing this burden on the State and is the best way to ensure people save for their retirements. It all sounds very logical until we examine it further and go deeper. A feature of the Irish State pension is its connectivity to the labour market. Eligibility for a pension from the State is based on either social insurance contributions, or PRSI, or else on means-testing. In other words, you qualify for a State pension based on your labour market history and payment of PRSI over several decades or you qualify based on a means test that shows you do not have enough to provide for yourself in retirement. So, yes, in theory, encouraging people to save for retirement helps to reduce their reliance on the State and the financial burden on the Exchequer of paying these pensions will be reduced. However, once we go deeper, saving for a pension is really expensive. As a rough rule of thumb, every €20 saved will buy a pension of about €1 a year for a man aged 66. That will be a flat pension, not one that increases, even though we know the cost of living increases over time. People who can afford to save enough over a long period to buy themselves a decent pension almost always have been in the labour force for several decades and almost always are the very same people who will qualify for a full State contributory pension based on their PRSI history. By the time they retire, they will have received thousands or even tens of thousands of euro in tax relief. This is allegedly with a view to saving the State money when they reach retirement but the fact that they may have saved a good pension for themselves will not reduce the cost to the State. On the contrary, these same people likely now also qualify for a full State pension. The individuals involved will be better off than if they had not saved. They will have saved their State pension and whatever money they receive from their private pension, which, incidentally is a pension semi-funded by Irish taxpayers through the generous system of tax relief that we have. Let us be clear; the savings to the State are exactly zero.

How about those who receive a means-tested pension, known as a non-contributory pension? By definition, they have not qualified for a contributory pension because they have not made enough PRSI payments and they do not have the money to achieve a decent standard of living in retirement themselves. Based on such a PRSI history, it is safe to assume their connectivity to the labour market over previous decades has not been strong, for a variety of reasons. They would not then have been in a position to avail of the tax-based incentives currently in operation or the joint pension schemes as part of the auto-enrolment process. Again, there is no saving for the State among this group either. There may be situations in which those people can contribute sporadically to auto-enrolment schemes over the period during which they are in employment. However, research would suggest that people with such a precarious link to the labour force tend to be in low-paid employment and so are prime candidates to opt out of auto-enrolment for very obvious reasons. Meanwhile, what little money they may be able to save might even end up being counted against them when it comes to taking the means test for non-contributory pensions. Perhaps, in that specific case, there would be a saving to the State but it would be minimal and would come at the expense of some of Ireland's poorest. We already know that the cost of tax relief for private pensions runs not into the hundreds of millions but into the billions of euro. That is the case every single year. Auto-enrolment will increase that by hundreds of millions of euro each year. We also know that more than 70% of pension relief goes to the top 20% of earners. For the most part, tax relief for private pension schemes are an expensive means of subsidising retirement savings for the better off in society, with little or no financial benefit to the State. The cost to the State will only continue to increase with the implementation of auto-enrolment at a time when about 20,000 extra people qualify for the State pension every year. The Minister for Finance is denying those in receipt of the State pension any more than an extra €12 quid a week in the midst of a cost-of-living crisis.

There is little to no fiscal benefit to the Exchequer in either the short or long term unless the eventual aim is to slowly erode the value of the State pension over time and to force people to rely on their private pension savings instead. That is something which my party, the Social Democrats, will strongly oppose. As I said at the outset, I am not saying that auto-enrolment is without benefit. Many hardworking people with no pension savings will be saving for the first time and will end up better off as a result, which is welcome. I am trying to look at this issue in the round, not just at some individuals but all of society and how auto-enrolment might fit into a more equal Ireland free from deprivation and poverty. A better use of some of the resources being earmarked for auto-enrolment would be to direct them towards funding the State pension to a level that would guarantee that older people can retire with enough money and income to live a life of dignity and to retire without the prospect of exposure to poverty in their retirement.

This is especially important given some other developments around the State pension. Last year, I drew the Minister's attention in this Chamber to the possible effects on pensioner poverty of the proposed total contributions approach for calculating State pension benefit. The approach gives payments on an automatic pro ratabasis to people who do not qualify for the maximum pension. That is very different from the bands used under the current system, which increases the payments people receive if they do not qualify for the maximum pension.

At the time I asked the Minister what analysis of the effects of this change she or her Department did. What I got was a scripted answer that did not directly address my questions, but suggested the answer was none.

The State pension is the single greatest reliever of old-age poverty in Irish society. We can agree on that across the Chamber. As recently as 2019, the CSO estimated that 85% of people aged over 65 would be living below the poverty line if it were not for our social welfare system. In 2003, pensioner poverty was an incredible 40%. It had fallen below 10% by 2010, driven almost solely by the doubling of the State pension rate over the course of a decade. As the importance of a State pension in relieving poverty was never clearer, I am hugely concerned by the implications of the total contributions approach, TCA. The likely implications are worrying. The new TCA will lead to much lower pensions for a huge number of retirees, most of whom have no idea that this change is on the way.

Under the old system, pensioners get the maximum rate of State pension if they average at least 48 weekly PRSI contributions per year over the course of their working lives. Those falling short of 48 weeks get a lower pension, but, as I said a moment ago, the good news for them is that the reduction is not proportionate. For example, for people who have an average of only 40 PRSI contributions, and not 48, the pension falls by just €5. That is a drop of just 2% and not the 16% that would be expected of a pro ratasystem. Some 30 PRSI contributions is 62.5% of what is needed for the maximum pension, but the €250 such pensioners would receive is 90% of the full amount. This generous tieringreflects an understanding that a heavy penalty for falling short of PRSI contributions could have severe repercussions for workers for whom the State pension may be the only income in retirement. The new TCA is not nearly as understanding. The TCA calculations are based on total PRSI contributions, not averages. People who have 40 full years of contributions get the full rate of the pension and those who have fewer than 40 get a reduced amount. However, under the TCA the much more moderate reductions are gone and pension calculations are strictly pro rata. This will create huge differences for many people.

For example, under the TCA, people with 20 years of PRSI contributions, that is, 1,040 weekly contributions, will get half the State pension or €139. Compare this to the current system where someone with the same 1,040 contributions over a career of 20 years would qualify for the full State pension. Someone with 1,040 contributions averaged over 30 years would qualify for €250 and someone with 1,040 contributions averaged over a 40-year career would qualify for €236. Let us compare that difference again. It is €139 under the TCA versus €236 or €250 under the current system. These are huge differences with big implications for retirees. In any society, a minimum income is needed for older people to retire with dignity and a lower State pension payment for a significant number of people will lead to more poverty among pensioners. Acknowledgment of this was presumably the motivation behind the design of the old system, where the tapering off of the level of pension is much less severe than under the new TCA.

There has been a total failure of the Government to communicate the implications of this change to the public. Many people are working on the assumption that gaps in their employment history will lead only to small reductions from the maximum pension when they retire and are totally unaware of what the TCA will do. The Government needs to consider the implications of this for thousands of people who are yet to retire. Here we are, cutting pensions for retirees using the TCA, but funnelling hundreds of billions of euro into private pensions savings. I am not saying that people who get that benefit do not need it but it seems there is a disconnect between where the money is being pushed and who is likely to need it the most. The TCA could be adjusted. We could bring it into bands, similar to the current system. If the TCA were not strictly pro rata, people who fall short of the full pension would lose out by less. That is very important.

The Government should consider the number of years of PRSI contributions that are necessary to achieve the maximum pension, as 40 years is simply not achievable for a huge number of workers with the prospect of credited contributions. The discussion around pension reform should focus more on what can be done to reduce the current rate of pensioner poverty further. Moving speedily to a new system that can only exacerbate the problem will serve Irish society and our most vulnerable citizens poorly. The funding that will be dedicated to auto-enrolment is an important factor in this regard.

I will conclude by noting that while encouraging people to save for retirement is not a bad thing at all, a few things need to be highlighted. It will increase the cost to the State and will not save money. The only way auto-enrolment decreases the pension burden on the State is if retirees are forced to rely more on their private savings through a reduction in the State pension. Auto-enrolment is a net cost to the Exchequer and to taxpayers. It is effectively yet another expensive subsidy to the private pension industry that stands to make huge additional profits from investing auto-enrolment moneys. It has lobbied strongly for this for more than a decade. Auto-enrolment simply cannot be considered a substitute for keeping the State pension at an adequate level. I urge the Minister to look closer at the TCA and the implications it might have.

Fergus O'Dowd (Louth, Fine Gael)
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This is an important debate. When people start talking about pensions, the eyes, especially of young people, tend to glaze over. They do not think about the future until they get nearer to that age, as some of us have. Some of us have passed it. I am ten years past 65 at this stage but I am lucky because I have my health and a good job and I am happy with that, but many people do not have that. The number of people aged over 65 at the last census was more than 800,000 people. While, thankfully, people are living longer, a significant portion of them have chronic illnesses and the lower people's income is, the more likely they are to have comorbidity or a series of illnesses that can lead to disability and poor health.

We really need to talk about this. I heard Deputy Gannon's contribution and I welcome this debate. It is hugely important. I hope on Committee Stage we will have an even longer discussion of all these issues. They cannot be taken in isolation because they are tied into longevity, which is what we are talking about, that is people living longer. When the age of 65 was set - I think by the Germans, I will give it to them because I forget which nation it was - most people had passed away by the time they reached 65. That is not the case now. We are living longer and because of that, we have more people retiring. We also will have fewer people in the workforce as we move forward and the burden on the people who are working will increase to support the number of dependents they have.

While I agree absolutely that the State pension is a hugely important funding mechanism for many people, the fact is that it will never be enough. I know many pensioners on the State pension and while it is welcomed by those who have it, they have significant other costs. This debate focuses in particular on those people in employment aged 23 to 60, who do not have a pension scheme. It is absolutely vital with the income they have, which would otherwise be either the State pension, either contributory or non-contributory, that they are in a position to opt into increased savings if they so wish, that is, if they earn less than €20,000. It is mandatory if they earn more than €20,000, but it is not absolutely mandatory. In other words, they can opt in and out depending on the situation. That allows choice and that is wise.

There are a lot of good things in this. We cannot and should not shoot it all down on a narrow base. What can we do to improve the situation? The biggest worry people have as they get older, apart from the cost of living, is that there is probably an increasing number of people who are renting as they get older. Twenty years ago, people aged over 65 - the vast majority of retirees - either owned their house or had bought it from the local authority. That is no longer the case. There will be increasing demands on the reducing income of older people, especially those on lower incomes, to be able to survive. One of the weaknesses in our society is that we do not have adequate or appropriate home care for older people. While the funding might be available with the HSE for the number of people who need home care because of the income they have at the moment, they cannot get it and they end up in inappropriate care, in many cases in nursing homes. We have to have a comprehensive look at all the services for older people and how we pay for them.

I presume that at the end of all of this, 20, 30 or 40 years hence, people will have a greater choice and more income and hopefully be able to survive better than they can now. At the same time, however, we must look at how greater support services will be funded. In this case, we might look at a country like Denmark, which has made radical changes in healthcare for all its citizens. They have free home care for people who stay at home. They have actually closed an awful lot of their nursing homes. They have reduced the number of acute hospitals, but they have specialists depending on geography. They have specialist hospitals that look after acute health. If we are not in a position to provide funding for the care of older people as they age, that is a huge downside of our present system. I believe that the principle of what the Minister is doing is right and I support it. Deputy Gannon raised many very important points in his contribution that need to be thought out and maybe debated more fully here.

If people do not have a pension scheme, what are they supposed to do? They are almost always going to be people in temporary and part-time employment. They are people who work in very physically demanding jobs. It is hugely important that we give them an opportunity to have more income as they get older. One of the big debates in the previous general election, as we here all know, was the fundamental question of increasing the pension age. Therefore, if we increase the pension age, there will be more income for the State to provide services. That is not the case, and I understand that is what people want. Therefore, we have to find further and other means of raising funds.

When the Minister is sitting at Cabinet will she ask her colleagues - I am asking them anyway - to look again at the long-term needs of our population and address them? While this would put more money in Pat's and Mary's pockets, there will still be significant demands on the State, which we will be unable to meet if we have not got the tax base. That is a hugely important issue. To raise people's social contribution in the long run over a lifetime as a proportion of their income would mean that as people get older, they would have the support services in place. That is what is happening in Denmark. It is worth looking at. Denmark to me is an ideal society in that respect, but it is more expensive and there are obviously more demands on the taxpayer to meet that. It is a very welcome debate, however. I am not part of the committee, as such, but it would be important to articulate many of these ideas there.

Ruairi Ó Murchú (Louth, Sinn Fein)
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It has been put by many colleagues in the House, particularly Deputy Ó Laoghaire, that a considerable number of us in Sinn Féin would have supported that overall idea of auto-enrolment. It is something for which we would have pushed for a considerable amount of time. An argument can even be made that we are late to the game in that regard. Like an awful lot of other schemes, however, the whole idea is that we get it right.

I am going to reiterate what has already been said because it is absolutely vital in this particular case. We obviously cannot support this and the first and foremost reason is that low-paid workers will not be allowed to opt out and claim back their money for a whole six months. A worker who is earning €20,000 per year would be down roughly €5.76 per week. That is on average basically €25 per month. We all know this. Anyone who is knocking on doors at the minute who did not know beforehand now realises the issue that is out there with the cost-of-living crisis. That relates to housing in all its senses, childcare, transport and the cost of fuel, heating and shopping. In some cases, people even say it is the cost of absolutely everything. The fact is that there is no flexibility and there is a particular issue around the six months. This is something that has to be looked at. We are all into the idea that this is to protect workers. This is about ensuring protection.

Obviously, I will add my voice that I would hate to think that anyone would consider dropping the old-age pension into the future on the basis of what we are doing here. However, rather than private funds that are seeking to make money for themselves, we actually need to look at the likes of the National Treasury Management Agency, NTMA, to manage these funds from a point of view of looking after the people out there because if that is what we are attempting to do, that is what we require absolutely.

While I have the Minister in the Chamber, I have to raise an issue that was brought to me by Anne and Kathleen, who do great work in my office, but beyond that also by a lady who rang me. It is the idea of the new hubs. We are talking about jobseeker's allowance, community welfare payments and even the new housing payments and all the rest of it. The issue with regard to the hubs at the minute is that there seems to be a particular-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Which hubs is the Deputy talking about?

Ruairi Ó Murchú (Louth, Sinn Fein)
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It is with regard to people now having to send their stuff, whether it is by email or otherwise. They go into the Intreo office, and it is obviously posted on. I think it is Galway for us. There are also prepaid envelopes. However, a number of people have told me that the stuff has not arrived in time. The number of people who have told me their applications have been cancelled without them being informed and whose materials have been lost is absolutely huge.

One lady was absolutely distraught on the basis that she was dealing with huge issues regarding medical care for her kids. She had put in this information. She was working alongside the local authority in that regard and then she suddenly discovered that everything was closed. As I said, I will bring the issue and information to the Minister-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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I thank the Deputy.

Ruairi Ó Murchú (Louth, Sinn Fein)
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-----but it is something that needs to be dealt with.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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I thank the Deputy.

Ruairi Ó Murchú (Louth, Sinn Fein)
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If I had more time-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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However, you do not.

Ruairi Ó Murchú (Louth, Sinn Fein)
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-----I would be dealing with the issue regarding the ex-Córas Iompair Éireann, CIÉ, workers. I know something is happening in the audiovisual room with regard to this, but the issue was brought to me by Liam and Pat, who would obviously be very good constituents of mine. Go raibh maith agat.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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You are some operator I tell you, Deputy Ó Murchú. I call Deputy Bríd Smith.

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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You would want to watch them Border boys.

Donnchadh Ó Laoghaire (Cork South Central, Sinn Fein)
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And so say all of us.

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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As my mother used to say, brave are the chancers. You are some chancer.

Ruairi Ó Murchú (Louth, Sinn Fein)
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I am deeply hurt.

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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This is something I have been talking about on behalf of various workers since I came in in 2016 and as workers' spokesperson for People Before Profit. There has been a real war on pensions, particularly defined benefit pensions, over the past ten years or so. The narrative is that we are living too long, and we cannot afford this, so we have to tackle it. Therefore, instead of longevity in life being something to celebrate and be excited about, and instead of making provisions for people to have longer mortality and be healthier as they go beyond their working age, we are seeing this everywhere right across the world as a burden. I want to argue that this is completely the wrong way to look at ageing and pensions and how we fund our ageing populations. Obviously, our ageing populations are funded in the first place by the work people have done all their lives. After all, the contributions they make to PRSI or, indeed, private pension schemes are deferred wages. That is what it amounts to. The wages they would have been taking home are deferred because they are put away for them for when they are due to retire. What the private pension companies have been doing is really going to war on the defined benefit schemes by taking them down and decimating them in most of the private companies and even some of the semi-State companies. However, I know from watching and being engaged with this that governments are also very concerned about the longevity of the working population and have attempted to bring in longer periods of a person's working life. Therefore, we went from 65 to 66. There was an attempt to go from 67 and then to 68. The Government got a bloody nose on that one and people had to sit down and think about how we are going to deal with the ageing population and the future of the pension scheme. Most important, although this has in theory the veneer of a progressive move, it is ultimately about trying to subsidise the State pension. It may not appear like that in the immediate term, but the bit-by-bit chipping away could, should and probably will mean from the perspective of Government that it will not be paying out the money it is paying out now on the State pension. That is a concern. That is a big concern for workers, people who try to represent them and all of the population as people's age increases.

There are currently 500,000 people receiving the State pension and for many of them, it is their only source of income. The State pension for many is all they have, with no additional family help or social supports. They struggle to afford the basics of food and housing, in particular, if they do not own their own house.

Deputy Bríd Smith:

Everyone here can testify to the increasing number of people in their 50s and 60s - I find they are mostly women - being made homeless after renting in private accommodation all their lives. With many landlords selling up, these people cannot afford, and certainly will not be able to afford in their retirement years, the exorbitant and brutal rents being charged right across the country, in every city and town. According to Central Statistics Office, CSO, figures, one in five people over the age of 65 is at risk of poverty. At 20%, that is a lot of people. One in three people living alone is at risk of poverty, according to the CSO. People living alone have less money to play around with. ALONE and Threshold recently found that people aged over 65 who are still renting in the private sector spend more than 35% of their income on rent, with one in four living in poor-quality accommodation that is unsuitable for their needs.

We need serious reform of the current State pension. For a lot of people, it is inadequate to enable them to live a decent life. It is absolutely unacceptable, in one of the richest countries in the world, while running budget surpluses and providing all sorts of giveaways to multinational corporations, that we fail or neglect to look after our elderly population. As far as we can interpret the Bill before us today, it is a patchwork solution for a broken State pension. The Government appears to be offering a distraction by mainstreaming private pension funds instead of providing adequate State pensions. The automatic retirement saving system seems to make it easier for people to save for retirement. However, it facilitates investment in private pension funds that come with additional risks to pension funds and with administrative fees. It may be very costly for people and for the State. By introducing the Bill, the Government is taking initial steps towards removing the State pension from circulation into the future. The Bill will see approximately 800,000 people automatically enrolled into the new retirement saving schemes. The plan is to begin with the introduction of new schemes from January 2025. However, given the extensive administrative and implementation requirements, it is hard to believe the schemes will be up and running in the ten months remaining for their establishment. Will the Minister update us on the progress of all the structures and administrative arrangements that will have to be wrapped around the schemes?

Initially, employees will contribute 1.5% of their gross earnings to the savings pot, which will be matched by the employer and topped up by the State. The rates and contributions will gradually rise until, from 2034 onwards, 6% of gross earnings will be paid by the employer, another 6% will be paid by the employee and 2% will come from the State. According to the Economic and Social Research Institute, ESRI, there will be a slight increase in the rates of people at risk of poverty as a result of automatic enrolment pension contributions because those contributions will mainly come from low-income families already struggling to make ends meet. We run the risk that people who already do not have enough money to buy the necessities in life will be forced to decide either to opt out of the pension scheme or cut back on expenditure on essentials like food, clothes, etc. for their families. Without appropriate safeguards to protect low-income workers and their pensions, we could see people opting out of the scheme in order to pay for bills they could not otherwise afford.

In effect, the scheme may only work for those on higher incomes. The requirements disproportionately penalise younger workers and women. The reason for the exclusion is unclear given that younger workers and women are the lower earners. Many younger workers will not be aware of the benefits. As we all recall, when we are young, we never think of a pension because it just does not occur to us. It is good that young people are being encouraged to pay into a pension but they will be excluded from the scheme on the basis that they are earning so little. That will not encourage them to believe this is the way to go.

I question the reasons for setting the minimum income at €20,000. According to the CSO, this will affect one in five people. The requirement limits access to the pension scheme by low-income and vulnerable households and individuals, part-time workers and women predominantly taking care of their loved ones at home. The income threshold may offer incentives to employers to keep wages low in order that they do not have to fulfil their obligation to contribute to the employee pension fund. There is a serious case to be made that the restrictions on enrolling in a pension scheme based on age and income need to be reviewed if we are to help the most vulnerable to save for the future.

The Bill sets out an investment strategy according to individuals' risk rating. A greater risk may lead to a greater pension fund return but, equally, it leads to a greater risk of losing money. It might sound a bit harsh but we need to be careful not to gamble on the Stock Exchange with people's futures. Gambling is a real problem in this country. The Government needs to be challenged on what it is doing with the Gambling Regulation Bill. What is being proposed in this Bill is like gambling but on the Stock Exchange. Where a greater risk is involved, it may lead to an endangering of the pension funds of poorer people and those most excluded from society.

Many people have low financial literacy. We should not expect people to make lifelong decisions and take risks with their pensions based on their feelings, information they might be given or what they are being told on the Internet. It is crucial that people are offered appropriate financial advice in an efficient manner. This is something for which the Pensions Authority probably should be responsible.

Regarding the pensions investments themselves, it is important to note that because most people are not actively engaged with pension plans, they do not know how to protect their investments in a safe and secure way. Of course, most people want a decent pension that at least maintains the standard of living they have when they are working. They do not want to face a future of poverty. Most people do not want investment managers to start playing around on the Stock Exchange with their hard-earned wages, that is, the deferred wages to which I referred. The risk is huge for all of us.

It is also unclear which types of financial assets will be considered for investment. The Bill refers to good practice when investing funds. It needs to set out specific environmental, climate and social governance requirements in this regard. I understand there was a recommendation at committee that the funds not be invested in fossil fuels or the arms trade. That needs to be spelled out in the Bill rather than just being a recommendation to which we would morally like to adhere. What happened to that recommendation and will it be inserted in the Bill?

On investment arrangements, the Bill does not specify what portion of pension funds will be invested in foreign or national assets. This is an important point. How much of a pension fund will be invested abroad instead of the money remaining in Ireland? Even in terms of how the capitalist system works, would it not be much more wise to invest in funds and businesses that are based in the country in which people are living and working and from which they are trying to extract their pension? We need specific considerations of that issue.

We also need to look at the fees that are being associated with private pension on behalf of those who are automatically enrolled. Those fees can be very substantial and they should not be paid for by individuals. I can think of one recent example, in RTÉ, where the fees for administration of a pension scheme are being passed on to the retired workers. It is a very recent move, and one that could easily be copied, that administration fees are being paid for out of the money in the pension fund.

Regarding taxation, it appears automatic enrolment contributions will not be eligible for tax relief, as is the case with conventional exemptions on pension contributions. Will the Minister clarify that? As I understand it, automatic enrolment contributions will be subtracted after take-home pay is estimated and all other taxes are paid. If that is correct, it means we will not have a practice that incentivises people. Other pensioners are being given the right to have their deductions made before tax and to benefit from tax relief. In the case of automatic enrolment, however, it seems it will be calculated on gross pay and taken out after the net amount is paid. Why is that happening? If it is happening, can it be changed?

Our primary concern is that the State pension is at risk and that it is unacceptable in times of great economic performance and high inflation that we are giving retired workers only €13,000, on average, per year to live on. The State pension should be enough for retired workers to live on and be equal to what the Government defines as a living wage, which today is 60% of median earnings. That would give a pensioner €25,000 per year instead of €13,000. Instead of fixing our public pension system, we are being offered a private pension scheme, which will be costly to everyone, especially the most vulnerable.

I want to finish by talking about retired workers themselves because-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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We are out of time, so I have to ask the Deputy to propose the adjournment. She will have six-----

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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Could I not take half a minute?

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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No. The Deputy will have over six minutes left when we come back. We are running an hour behind time.

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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So the Ceann Comhairle wants me to shut up now and come back and do six minutes tomorrow.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Yes.

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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Would it be okay to speak for two minutes now and not come back tomorrow?

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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That means we will be an hour and two minutes late.

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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Compared to an hour, two minutes is nothing.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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All right, go on.

Bríd Smith (Dublin South Central, People Before Profit Alliance)
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My very last point is on the retired workers themselves. I have introduced a Bill to amend the Industrial Relations Act to give retired workers the right to be represented where their pensions have been interfered with. It is shocking to think that they can say nothing, as happened during the austerity years to all our public sector workers, particularly those in the semi-States. In goes the State and takes out the workers' pension fund and they never get to say tickety-boo about it. The decent thing to do, if we are to proceed down this road, would be to give the workers the right to representation should their pensions be interfered with by anybody, including the State.