Dara Calleary (Mayo, Fianna Fail)

I join in the good wishes and wish Senator O'Donovan health and happiness. He will be very interested in auto-enrolment.

The Government has prioritised the introduction of an automatic enrolment retirement savings system. It will be known by its brand name My Future Fund. It is a key reform commitment to support workers and a key priority for me personally as Minister for Social Protection. The scheme is necessary to address the pension coverage gap that exists in Ireland. It is estimated that only 35% of private sector workers are in pension schemes. This pension coverage gap exists despite the fact that successive Governments, over many decades, have provided significant incentivisation through tax relief. If not addressed now, this low level of coverage means that a large cohort of people will, in their retirement, be fully dependent on the State pension and whatever assets they have otherwise accumulated. For some, this will result in a significant drop in living standards.

Currently, we have four workers for every person over the age of 65. By 2050, we will have two workers for every person over 65. As well as a pension coverage gap, there is the ongoing challenge of pension adequacy because even where people may be in a pension scheme, many of them are not saving enough to ensure an adequate income in retirement that is commensurate with their lifestyle ambitions.

It is important to note that the State pension will remain the bedrock of the State pension system, providing retirees with a basic level of income and protecting them against pensioner poverty. In that context, My Future Fund will complement the State pension and provide additional income to future retirees to secure their standard of living in retirement.

Many milestones have already been reached on this journey. The legislation to underpin this new system, the Automatic Enrolment Retirement Savings System Act passed through this House in 2024. Following an extensive procurement exercise, Tata Consultancy Services, TCS, based in Letterkenny, County Donegal, has been appointed as managed service provider of the scheme’s administrative services and is busy building, configuring and testing its systems in line with the scheme’s requirements. Three investment managers - Irish Life Investment Managers, Amundi and BlackRock - are being selected following an extensive public procurement exercise. These companies are busy readying their funds and developing and testing integration with TCS. My departmental officials, who have done extraordinary work on this project to date, are continuing to work hard and are working closely with in excess of 60 payroll product developers across a range of payroll providers through the Payroll Software Developers Association to assist them with the changes they need to make to their software to facilitate the calculation and collection of My Future Fund contributions. Testing work is ongoing with the Revenue Commissioners, which will be providing vital payslip data. I recently announced the recruitment of a chief executive officer of the new National Automatic Enrolment Retirement Savings Authority, NAERSA, as well as the chair and members of its board. Further staff recruitment is at an advanced stage.

Members of this House will have seen the advertising campaign over the summer featuring ice cream with a cherry on top. This has been a continuation of the communications work that has been taking place over the past couple of years, which is now shifting from direct employer and other stakeholder outreach through webinars and in-person conferences to paid public awareness campaigns. This will continue and intensify over the coming months.

A key point in the communications strategy for every citizen, but particularly for those of in the Oireachtas, is the auto-enrolment information hub that is available at . This resource has lots of information, including explanatory videos, to explain the scheme to us so that we can explain it to all types of stakeholders.

I want to make the point that the system was deliberately branded "My Future Fund". This reflects the purpose of the scheme, namely, to save and invest for the future, while highlighting that these savings will remain the personal property of the participants. This is not a State fund. NAERSA will do the vast bulk of the administration of this scheme. There will be little for employers to do and very little administrative cost for them. The authority, which has statutory independence, will determine who will be enrolled. It will electronically issue notifications to payroll systems, collect the contributions and pool those contributions for onward investment with investment managers. It will provide online portals for employees, employers and agents to access accounts and services. It will provide a customer support service. It will ensure compliance with the scheme by following up where contributions are not collected or are collected and not remitted, up to and including the imposition of sanctions, penalties and prosecutions where necessary.

I moved the launch date from the end of September to 1 January 2026 to allow payroll providers and small employers more time to prepare and to align their systems with the normal tax year. The design of the scheme is deliberately straightforward. It is easy to understand. From the investment perspective, there is a default strategy whereby participants’ savings are moved from a higher risk to a medium-risk to a lower risk fund the closer they get to the retirement age of 66. The scheme facilitates choice between these three risk levels but does not require a choice to be made by the participant. In addition, the scheme has a "pot follows the member" approach, which means that where an employee moves from employment to employment over his or her working life, that employee can maintain the same My Future Fund account at all times. Further, the system is automated through payroll software to minimise the administrative burden for employers, especially those that do not have expertise in operating pension schemes. These design features have come about from studying what other countries have done well but also what they have done badly, with a view to doing everything better here. This is the only advantage of being the last country in the OECD to adopt such a system.

In regard to the eligibility criteria, those earning in excess of €20,000 per annum across any number of employments, aged over 23 and under 60, and not already contributing to an occupational or private pension scheme through payroll will be automatically enrolled. It is expected that about 750,000 workers will be enrolled in this way. Participants will be able to opt-out after six months’ mandatory participation, at which time they will get their own contributions back, but the employer and State contributions will remain invested in their accounts.They will also be able to suspend their participation for up to two years. In all cases where a person opts out or suspends, they will be automatically re-enrolled after two years, after which opt-out and suspension options will be available again. Anyone who is outside of these age and income thresholds may voluntarily opt in to the scheme. Where they do, their employer and the State will be compelled by the legislation to contribute as if they had been automatically enrolled.

I will address the suggestion that the self-employed should be eligible for My Future Fund. It will not be available to the self-employed during the initial phase because the payroll-based operational model this system is based on does not suit the self-employed. The system is based on there being an employer who pays an employee through an established payroll facility, which is absent for the self-employed. The fixed contribution rates for auto-enrolment may not suit them either, given the variability of their weekly or monthly earnings. I am unaware of any country that has successfully included the self-employed in its auto-enrolment system. An attempt to do so in Chile, for example, failed and was ultimately substituted by a legal requirement on the self-employed to contribute to a private pension on their own behalf. It is important to note that the self-employed in Ireland already have the entire private pensions market, as well as State support in the form of generous tax relief allowances, to help them save for retirement.

In terms of how much workers will save to My Future Fund, contributions will be made equally by employees and employers, with the State providing a top-up of €1 for every €3 saved by an employee. In short, every €3 saved by an employee will automatically become €7. Contributions will start at 1.5% of gross pay, increasing to 3% after three years of operation, to 4.5% after a further three years of operation and finally to 6% from year ten. This will, in effect, add up to 14% of an employee's gross income and is the very least that international evidence suggests is an adequate rate of saving. The incremental implementation of contribution rates will allow employees and employers to adjust over time.

The money will then be invested, as I have already mentioned. While NAERSA will ensure all investments will be in line with the prudent person principle, and in the best long-term interests of the participants, each of the contracted-for-investment services will be required to have environmental, social and governance, ESG, principles applied to it in accordance with section 74 of the auto-enrolment Act 2024.

At the end of this investment period, each participant will be able to access their savings pot once they reach the State pension age of 66. In the first few years of the scheme, drawdown products will be limited to a simple lump sum payment because savings pots will be relatively small. Taxation arrangements are being provided for separately in the finance Bill but they will broadly align with the tax treatment of PRSAs, including the application of the tax treatment of trivial pensions. Further drawdown options will be developed over the coming years alongside the annuity and ARF options that are already available from the pensions market, but this will be for NAERSA, which is statutorily independent, to consider and make recommendation on.

A number of issues were raised following our audiovisual room briefing in July and the Dáil debate last week. One is that the NTMA should invest the savings of participants, rather than NAERSA investing the savings in the commercial market on their behalf. This suggestion comes from the wish of some to keep participants’ funds entirely away from the services of the market. However, that desire would not be fulfilled by involving the NTMA because the NTMA invests State money in the international stock market and uses commercial investment managers from private industry to do so. Therefore, nothing would change by requiring the NTMA to become involved in My Future Fund; in fact, all that would happen is the NTMA would have to set up a NAERSA-type entity, which we are already doing.

A Sheanadóiri, I took this time to briefly explain the policy rationale for introducing My Future Fund to ensure that we all as public representatives have a clear understanding of its key features. This will be a transformative scheme for this country and will bear great fruit, particularly for younger generations. It will not be without its challenges, however, and I want to work with all Senators in addressing those challenges and the inevitable teething problems. Ultimately, My Future Fund and the auto-enrolment system is an investment in our country's future.