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

It is a pleasure to be able to bring this Bill before Seanad Éireann. I have been very encouraged by the support it has received from across the political spectrum and from stakeholders. Auto-enrolment, AE, has been talked about for more than 25 years in this country. There was a major straw man public consultation on it in 2018. This was followed by a series of Government decisions between 2019 and this year that settled the design of the system. Last week, the Bill was passed by Dáil Eireann with no changes to the overarching design. This truly is an idea that has met its time. Senators now have the opportunity to push forward with this historic reform of the Irish pensions landscape.

Enactment of this Bill will pave the way for approximately 800,000 workers to be brought into a retirement savings scheme for the first time. Implementation of AE 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 pension schemes. Such a low level of pension coverage is not acceptable.

As I have stated here many times previously, 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 beyond the State pension. While some employers provide occupational pension plans and other retirement savings arrangements for their employees, there is a large gap in retirement savings that this Bill seeks to address. The goal then of AE is to increase pension coverage and pension adequacy in Ireland.

Before going through the Bill section by section, I wish to refer to some of the issues that were raised in the Dáil debates and elsewhere, as I expect some of them could arise here. First, on the issue of allowing AE participants to opt out of the scheme, an initial six-month period of mandatory participation was chosen because the period needs to be sufficiently long in order that participants can see a rise in the value of their fund as contributions are made each pay period. I also believe that when they see this, they will not want to opt out. If the period was shortened or eliminated and participants had a wider range of opportunities to opt out, it would risk defeating the underlying policy objective of providing a better retirement outcome for members. It would be too tempting for people to put off saving for their future.

On the issue of the National Treasury Management Agency, NTMA, possibly managing the investments of participants, the reason for this suggestion appears to be a desire to somehow keep participants' money away from the services of the private market. However, this proposal is based on a misunderstanding because that would not be achieved by involving the NTMA. The NTMA invests State money, not private money. It does so with the assistance of commercial investment managers from private industry. Therefore, if the NTMA was used to invest AE money, it would do it by engaging with commercial investment managers, exactly the same as is proposed for the new State body, the national automatic enrolment retirement savings authority, NAERSA. Accordingly, using the NTMA for investment would make no difference to AE participants or provide them with any greater protections.

It is also important to note that the NTMA has no experience or systems to administer the hundreds of thousands of private accounts holding people's personal money. Accordingly, it would need to acquire or develop such systems and capabilities to take on this role. That is why a new State body, NAERSA, is being established to manage the AE system. It is my view that AE is so important that a body focused solely on achieving the best outcomes for participants is needed. Moreover, NAERSA will be a custodian for participants' money, acting in their best interests, and providing a buffer between them and the complicated pensions market.

I will now provide a quick overview of the Bill. It provides for a new, highly automated retirement savings system that will automatically enrol workers based on payroll data. Initially, employees aged between 23 and 60 years of age who earn over €20,000 per year across all employments, and who are not already paying into a pension scheme in respect of any of those employments, 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 and for that 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 employers, 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.The Bill provides for the establishment of NAERSA, which will 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.

Before I go through the Bill in detail, I want to mention to Senators that I will be tabling a number of technical amendments on Committee Stage that have been identified by the Office of the Parliamentary Counsel as enhancements to the clarity and coherence of the Bill overall. None of these is policy related or represents substantive change to the agreed design of AE, but I just need to flag them in advance.

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

Sections 6 to 9 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 and the principal functions of this new authority. 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 provide for the arrangements for the board of the new authority. These provisions include the number of board members, the term of office, the conditions of membership of the board, how 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, and for the remuneration and expenses of board members and committee members.

Sections 22 to 24 set out provisions in relation to the disclosure of material interests and non-disclosure of confidential information. Sections 25 to 29 provide for the appointment process for the chief executive, for the functions of the chief executive, for his or her accountability to the board, for the delegation of certain functions by the chief executive to a member of staff of the authority, for the circumstances where a person becomes disqualified from being chief executive, and for 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 service 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 the authority.

Section 42 requires the authority to publish statistical data relating to participation in the AE system, to the types of investments held by AE provider schemes, 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 AE system.

Sections 44 to 46 provide for the Pensions Authority's supervision of the authority. This includes the submission of a supervisory report and the payment of an annual fee for the cost of conducting this supervisory report.

Section 47 provides for the definition of a number of relevant terms used in Part 3, which 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 of age and the earnings threshold of €20,000 a year.

Section 51 defines 'exempt employment' as that which is already covered by an existing pension scheme. Section 52 sets out the arrangements regarding standards for existing schemes that would continue to render an employment exempt. It also provides that the authority, in consultation with the Pensions Authority, will draw up these standards by the end of year six of operations at the latest. It does not preclude the standards being brought forward earlier.

Section 53 provides for those who are not participants to have a right to opt in to the system, should they wish to do so and 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 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 when 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 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. These risk ratings will be provided for through ministerial regulation, which will have regard to any existing scales or methodologies on risk and any custom and practice that takes into account climate-related risks.

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 risk level. 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 set out the arrangements for the management of participants' contributions and the investment rules to be observed by investment managers.

Section 75 specifies the requirement that contracts with investment management providers must contain provisions relating to environmental, social and governance matters. Section 76 requires the authority to keep an account for each participant.

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 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 the death of a participant.

Sections 85 to 88 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 set out the necessary provisions for the application of the Dormant Accounts Act to savings in the auto-enrolment system.

Sections 100 to 104 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 under certain conditions. Section 110 provides for amendments to the Social Welfare Consolidation Act 2005, relating to the sharing of information.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 a range of determinations by the authority 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.

Sections 127 to 130, inclusive, set out provisions to protect employees from penalisation or from being hindered in participating in the auto-enrolment system, including by having recourse the Workplace Relations Commission.

Sections 131 to 137, inclusive, set out the provisions concerning offences committed in contravention of the Bill.

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 Senators for their patience. I strongly believe automatic enrolment will be a transformative scheme for our people. When implemented, this new system will enable hard-working people to build retirement savings they can enjoy on top of the State pension in old age. I have tried my best to get the right balance in this Bill between affordability for employees and for employers and the overarching need to ensure pension coverage and adequacy is greatly improved in this country. The gradual easing in of contribution rates over ten years as well as the earnings threshold are key to this balance. For employers, these labour costs can be gradually absorbed and planned for. Moreover, most employers will be spared any real administrative burden because the new authority will do all the heavy lifting. Therefore, for employers with existing pension scheme offerings, automatic enrolment will not feel like a second pension scheme as the work will be done for them.

The introduction of automatic enrolment has been a key priority for me since my appointment as Minister for Social Protection and I am delighted to finally bring this Bill before the Seanad this evening. I respectfully ask Senators to lend it their full support.

With that, I commend the Bill to the House.