Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697803789249.pdf (Ireland)
DRAFT HEADS AND GENERAL SCHEME OF THE AUTOMATIC ENROLMENT RETIREMENT SAVINGS SYSTEM BILL 2022 Ibec submission to the Joint Committee on Social Protection, Community and Rural Development and the Islands 25 November 2022 EXECUTIVE SUMMARY Ibec is a strong advocate for Automatic Enrolment (AE) and acknowledges the significant progress that has been made in agreeing the high-level principles of its design, which are reflected in the draft legislation.
Part 2 - Participants: The proposal for automatic enrolment of employees aged between 23 and 60 years and earning €20,000 or more a year is appropriate.

However, the upper salary threshold of €80,000 is too high.

AE should be an entry-level low cost savings with an upper salary limit of €50,000 above which employers are not obliged to contribute.

The General Scheme also provides no detail on what will constitute a qualifying existing occupational pension scheme to exempt employees from enrolling in AE.
Ibec is opposed to the proposal in Head 5 that there will be no statutory waiting period to enroll an employee.

Many occupational pension schemes include wating times which are aligned to the probationary period specified in employment contracts.

The self-employed should be included in AE on an opt-in basis.. Part 3 - Contributions: In comparison with auto-enrolment schemes in Australia, New Zealand, Poland and the UK, the overall contribution rate is high.
The initial success of the AE scheme will depend on achieving the correct balance between developing a savings habit and income adequacy in retirement.

Ibec believes that in its early stages, the balance should be firmly directed towards developing savings habits.
The General Scheme should provide for: an affordability review, which includes an economic impact assessment and business costs evaluation; policy certainty on labour costs and employment regulation during the roll-out period; and a staged introduction by company size.

The introduction of a State top up contribution approach alongside the current system of tax reliefs, as proposed in the General Scheme, will add further complexity to the system.
Part 4 – Opt-Out and Suspension: Ibec is concerned at the decision to reduce the three year automatic re-enrolment gap originally proposed to two years.

This will impose an excessive administrative burden on employers and the State.

1 Part 5 – Central Processing Authority: Ibec accepts the rationale for a State-run administration system working with a small number of private providers.
However, the Central Processing Authority (CPA) is a large and potentially expensive infrastructure project, which should be subject to an appropriate cost benefit analysis.

Revenue has well-established expertise and experience in collecting both tax and social insurance contributions.

It can systematically deliver to employees across multiple employers under one structure.

It is also in the best position to accommodate other potential AE savers such as self-employed and home carers.
Part 6 – Contribution collection: Employers are already accustomed to dealing with the Revenue in relation to remitting income tax and social security contributions on behalf of their employees.

Given that the CPA will require access to Revenue real-time payroll to ascertain an employee’s eligibility, and as a compliance measure to check if the correct contributions have been paid by both employee and employer data, this begs the questions if a new collection agency is required.
Part 7 – Individual accounts: The proposed system is very rigid.

There can be no variation in the set contribution rates and there is no facility for AVCs or similar once-off payments.

This will inter alia exacerbate the gender pay gap – employees who take up caring duties and miss out on contributions will have no way to make good on them.
Part 8 – Investment Profiles Available to AE Participants: Ibec supports the rationale of offering a relatively small number of ‘standard choice’ funds to accommodate different risk/reward profiles.

However, the choice architecture is particularly important to avoid an underperformance of savers’ investment funds.

The pensions industry is in the best position to provide advice on ‘lifestyle’ and ‘target date’ funds, and the appropriate de-risking strategies.
Part 11 – Communication and Informaton: Given that employers and trade unions have a specific interest in AE and will be critical to building trust and its successful implementation, it is important that they have explicit role in the AE system.

The Labour Employer Economic Forum (LEEF) is the most appropriate mechanism to achieve this and its role should be formalised in the system’s advisory and communication structures.
Part 12– Compliance: Ibec supports the compliance objectives but has concerns about the proposed enforcement mechanism.

Ireland already has three independent, statutory bodies in this area: the Revenue Commissioners, the Workplace Relations Commission and the Pension Authority.

Using the CPA as an additional authority to specifically enforce employer compliance is unnecessarily bureaucratic and expensive.
Part 15– Retirement benefits: The General Scheme makes no provision for AE participants to continue contributing beyond the State Pension age.

Given that the Government has agreed that from January 2024, people will have the option to continue working up until the age of 70 in return for a higher State Pension, this inconsistency between the two systems is surprising and should be addressed.
Part 17– Review and evaluation: Significant governance decisions made at this juncture will restrict options for developing the AE system.

It is also more likely that system’s shape will be embedded at an early stage and impervious to significant change.

Greater certainty around the implementation roadmap, the design of the AE scheme and its implications should be comprehensive from the outset.
2 INTRODUCTION Ibec welcomes the opportunity afforded by the Joint Committee on Social Protection, Community and Rural Development and the Islands to submit our views on the Draft Heads and General Scheme of the Automatic Enrolment Retirement Savings System Bill 2022 (hereinafter referred to as the “General Scheme”).
We remain a strong advocate for Automatic Enrolment (AE) and acknowledge the significant progress that has been made in agreeing the high-level principles of its design, which are reflected in the draft legislation.

With just 35% of private sector workers having occupational pensions, Ireland’s supplementary pension coverage has remained stubbornly low, despite policy announcements by successive governments over the last 20 years.
If this issue remains unresolved into the medium term it risks doing serious damage to our consumer economy leaving a generation with substandard pensions coverage and an unsustainable bill for the State.

Therefore, we believe that it is worth re-stating the principles set out in two previous Ibec submissions to Government on the auto enrolment system in 2015 and 2018.
The system should: • encourage and educate individuals to take personal responsibility for their pension savings, • be a low cost, high coverage supplementary savings scheme for those on lower incomes and without access to an occupational or private pension arrangement, • supplement the existing public pension system , • provide certainty in terms of policy governance, for both employees and employers • be seen as equitable • be based on a simple regulatory framework that incentivises employers to comply.
An AE system should not: • have negative and unintended consequences for growth and employment in some firms, particularly SMEs and businesses who operate on low margins • be a new burden on employers in the form of contributions to employees' pensions funds or compliance costs • be perceived as an additional tax by employees • provoke a longer-term shift away from tailored occupational provision • increase costs for many employers who already provide pensions, thereby forcing them to level down existing provision Ibec’s views on specific sections of the General Scheme are given below.
PART 2 PARTICIPANTS Ibec supports the rationale and general parameters set out in Head 4 of the General Scheme in relation to the target membership.

The new system should be an entry-level low cost savings vehicle for workers whose employer does not offer its own scheme.
Therefore, the proposal for automatic enrolment of employees aged between 23 and 60 years and earning €20,000 or more a year across 3 all employments is appropriate, particularly when employee over the age of 60 or under the age of 23 may opt in if they so wish.

Ireland has a substantial level of private sector provision which should be preserved and not destabilised by the AE system, as existing pensions will usually be of a higher value than the new statutory minimum.
Therefore, Ibec believes that the upper salary threshold of €80,000 is too high.

AE should be an entry-level low cost savings with an upper salary limit of €50,000 above which employers are not obliged to contribute.

Ibec agrees that an employment relationship, for which there exists a qualifying occupational pension scheme into which the employer and employee are actively making contributions, should be exempt from enrolment.
It notes the rationale for this exemption is that the retirement savings system will complement, rather than replace, existing private pension provision.

However, the General Scheme provides no detail on what will constitute a qualifying scheme, beyond stating that the standards will be set by Ministerial regulation.

Given that this will be a critical element in the design of the new system, it should be addressed in primary legislation.
Ibec is opposed to the proposal in Head 5 that there will be no statutory waiting period to enrol an employee.

The General Scheme’s rationale that this precludes the use by employers of probationary periods or short temporary contracts as a means of avoiding auto-enrolment obligations is not credible.

Many occupational pension schemes include wating times which are aligned to the probationary period specified in employment contracts.
The proposal set out in General Scheme is inconsistent in terms of existing pensions legislation.

For example, Section 121 of the Pensions Act 1990 requires employers, with existing pension schemes which have waiting periods, to provide access to a PRSA after six months from the date of commencement of employment.

Ireland has a substantial level of private sector provision which should be preserved and not destabilised by the reforms.
If adopted, Head 5 will could create an anomaly where a new employee will be require to enrol in the AE system before switching to an (often more beneficial) occupational scheme after just six months.

Employers should also not be expected to waste resources auto-enrolling individuals with a high risk of opting-out on the basis of short periods of work.

This includes short-term seasonal workers, casual workers and workers on short fixed-term contracts.
Sectors where staff turnover is high will be hit disproportionately hard by having to auto-enrol too early.

Retail, distribution, hospitality, IT/hi-tech and other sectors that use a high proportion of temporary labour could face particular challenges.

It also makes little sense for the State to be constantly refunding individuals with a high propensity to opt out from the system.
Therefore, the AE system should operate a waiting period of six months (the typical length of an employment probationary period).

Ibec broadly supports Head 6 which allows some workers who may not be in scope to opt-into the AE system.

However, we argue that the self-employed should also be included on an opt-in basis.. Self-employed people make up about 16% of the working population and only 30% of self -employed have supplementary pension coverage.
We acknowledge the systemic challenges with accommodating this group and the possibility of linking fixed contributions to the intrinsic variability in their weekly/monthly earnings.

However, if the State assumes responsibility for contribution collection (see Part 6 below), it should be able to develop the technical infrastructure to make this possible.
4 PART 3 CONTRIBUTIONS Head 9 proposes a maximum 14% contribution rate is to be made up as follows: 6% from the employee, 6% from the employer, and 2% from the State.

In comparison with auto-enrolment schemes in Australia, New Zealand, Poland and the UK, the overall contribution rate is high.
The General Scheme’s explanatory note cites research1 which indicates that that an overall contribution rate of more than 8% but less than 15% will deliver a target income replacement rate for well and poor performing portfolios and that ‘Setting the rate at the higher end of this scale provides a better probability of achieving the target income replacement rate even for those who are unfortunate to retire during a market downturn.’ Apart from the obvious shortcomings of an investment strategy that would expose retirees to the vagaries of financial markets at the point of retirement, the explanatory note pays little attention to the issue of affordability.
The initial success of the AE scheme will depend on achieving the correct balance between developing a savings habit and income adequacy in retirement.

Ibec believes that in its early stages, the balance should be firmly directed towards developing savings habits.

Debates about retirement income adequacy will be entirely hypothetical in the wake of significant opt-out by members facing a rapidly increasing pension bill.
Employer contributions Head 9, Subhead (2) proposes that employer contributions will: be levied as a percentage of the employee’s gross earnings; match the employee contribution; be phased in at 1.5% for years one to three, 3% for years four to six, 4.5% for years seven to nine and 6% from year 10 onwards; calculated on the earnings of the employee up to €80,000; and deductible for corporation tax purposes.

The introduction of AE must also take account of the country’s economic situation.
This is important from the point of view of firms, but also households.

AE will mimic the effect of an additional tax on both households and firms and, as such, should be rolled out at a time when it is affordable.

This ideally requires a stable economic period for introduction to mitigate its impact.

The AE system is being introduced during a significant economic downturn, spiralling inflation, increased interest rates, and an extremely uncertain trading environment.
In recent years, Government has also introduced an untargeted and costly suite of initiatives which have added to firms’ labour costs.

Many of these have added to uncertainty and are a major barrier to acceptance of the introduction of an AE system.
These include, but are not limited to changes to, the PRSI treatment of pensions, increases in employers’ PRSI, increases in the minimum wage, the promise of a living wage, statutory sick pay and extended family leave entitlement, as well as increased employment regulation.
The AE system legislation will have less impact on sectors and employees who are well covered in terms of pension provision, but it will represent a significant challenge for sectors and workers who, up to now, have very low participation rates.

As the ESRI has pointed out: ‘This cost would be higher in more labour-intensive sectors.

Under both thresholds, over 20% of the target population work in 1 1 ‘A Portfolio Approach to Assessing an Auto-Enrolment Pension Scheme for Ireland’.
The Economic and Social Review, 48(4).

Pp.515-548.

Online.

Available at: https://www.esr.ie/article/view/825 5 wholesale and retail, followed by around 15% in manufacturing, both relatively labour-intensive sectors.

It may also be noted that around 60% of the target population are based in workplaces of less than 50 people.

While some of these workplaces are part of larger firms, small independent businesses are likely to have less administrative capacity’2.
In order to address these issues: • An affordability review, which includes an economic impact assessment and business costs evaluation, should be conducted at each phase of the rollout • Policy certainty must be given to firms in relation to additions to labour costs and employment regulation during the roll-out period.

• The dates at which companies will become subject to the AE system should be staged according to company size.
Smaller businesses are less likely to provide occupational pension provision for employees and will need longer to prepare and budget for the changes.

A steadier build-up of registrations will also put less strain on the system and help avoid teething issues.

State incentives – Head 9, Subhead (3) Head 9, Subhead (3) proposes that the State will contribute €1 for every €3 that the employee contributes towards their retirement savings account.
Given that the fully implemented contribution rate is 6% of gross earnings for the employee, the effective rate from the State will be 2% of gross earnings.

Compared with the current tax relief system, the value of this ‘top up’ contribution equates to 25%.
In its 2018 submission to the Department of Social Protection Consultation on an Automatic Enrolment Savings System for Ireland3, Ibec argued that pension contribution incentives should be 'product' neutral in terms of incentives across all pension structures The introduction of a State top up contribution approach alongside the current system of tax reliefs, as proposed in the General Scheme, will add further complexity to the system.
Different values of the financial incentives in one system vis-à-vis the other may encourage employees to move to the system that is most financially beneficial to them.

There could be an incentive for higher rate taxpayers to opt-out of AE in favour of tax relief in ‘traditional’ pensions, where a 40% incentive is provided.
Standard rate taxpayers currently saving for retirement, where a 20% incentive is provided, may be incentivised to leave their existing pensions (which are incentivised by tax relief) in favour of AE, where, in comparison with the current tax relief system, the value of this top-up contribution equates to 25%..

There have been a number of attempts in the past to reform aspects of the supplementary pension system.
The most common outcome has been that, although the reform may achieve the specific objective of the change, it increased the overall complexity of the pension system and did not achieve any aggregate improvement.

In practice, if individuals stayed in the one job, or had the same employment status throughout their working life, their pensions would be governed by a single set of rules.
However, this is now seldom the case and as individuals’ employment status 2 A micro-macro economic analysis of pension auto-enrolment options.

https://www.esri.ie/publications/a- micro-macro-economic-analysis-of-pension-auto-enrolment-options (2019) 3 www.

://assets.gov.ie/43724/aba7fcd9cbec47af96d3e8a6d73640fe.pdf 6 change, they cross over pensions 'systems' and the complexity of their pension multiplies.
The setting up of a parallel set of incentives in the AE system has the potential to cause confusion amongst participants and destabilise existing schemes.

Therefore, we believe that the tax treatment of contribution and benefit options should be 'product' neutral across all pension structures.

While we acknowledge the argument that a State contribution of €1 for every €3 saved for AE is easily understood and appreciated, the potential for unintended consequences makes it a risky option.
Instead, Government should work with employers and the pensions industry and employers on a communications strategy to present the benefits of pensions tax relief to employees in an easily understood format.

As a first step, the tax relief or ‘Government contribution’ could be highlighted on benefit statements.

PART 4 OPT-OUT AND SUSPENSION Head 10 sets out the provisions for opting out of the retirement savings scheme after six months with a two month window in months seven and eight.
Employees who opt-out will be automatically re-enrolled after two years.

Ibec broadly supports the proposal for an ‘op-out’ window in month seven and eight.

This should help to support retention rates and reduce administrative burdens.

Ibec also supports automatic re-enrolment as a pragmatic approach to continually ‘nudging’ people who opt-out to re-evaluate their retirement savings plans.
Ibec recognises the provision for a limited savings suspension period with conditions outlined in Head 11 and Head 12 to address the differential impacts of auto-enrolment on individuals’ personal and financial circumstances.

The minimum period of one year allowed for should lessen the administrative burden of employees suspending their contributions for shorter periods of time.
However, we are concerned by the decision to reduce the three year automatic re-enrolment gap originally proposed in the Department’s 2018 ‘Strawman’4 to two years.

This will impose an excessive administrative burden on employers and the State.
While it is proposed that the CPA will be responsible for keeping track of employees’ membership status, re-assessing the eligibility of employees who opted out or ceased membership, and automatically re-enrolling them, employers will have to adjust their payroll systems more frequently.

PART 5 CENTRAL PROCESSING AUTHORITY Ibec accepts the rationale for a State-run administration system working with a small number of private providers, as originally set out in the Strawman proposal.
Given that a large proportion of the target population is lower and medium income earners, achieving low unit operating costs through scale is important.

Head 15 sets out the CPA’s responsibility for the operation, coordination, supervision, and development of the AE system.
The Explanatory Note sets the operational responsibilities, which will be funded through a loan from the State, in more detail: The tasks will include among other things participant registration, enrolment, contribution collection, participant services and administration, compliance, defining and overseeing management standards 4 www.gov.ie/pdf/?file=https://assets.gov.ie/69522/92c139a0d2c247f09c4d4078e7bf30be.pdf#page=1 7 for registered providers, tendering for investment fund services, evaluating investment fund services, the development of IT services and a wide range of policy and legal issues and financial affairs.
There will also be costs related to setting up of the CPA and the development and construction of the auto- enrolment ICT infrastructure.

Ibec has concerns about the scale of the new agency, and the range and complexity of these responsibilities.

The CPA is a large and potentially expensive infrastructure project, which should be subject to an appropriate cost benefit analysis, including a comparison with using existing pensions industry infrastructure.
This analysis should include an estimate of the State’s potential exposure and the cost of servicing a loan which will ultimately be distributed among the participants across generations.

However, due to our concerns about the potential for a new agency to generate significant costs and additional layers of complexity, Ibec does not believe that a case has yet been made for a new CPA as proposed in Heads 25 -30.
In its submission to the 2018 Strawman consultation, Ibec argued that the Revenue Commissioners have well-established expertise and experience in collecting both tax and social insurance contributions.

Revenue also has the capacity to address many of the other challenges facing an AE system.

It already has the secure online identity authentication tools and can systematically deliver to employees across multiple employers under one structure.
It is also in the best position to accommodate other potential AE savers such as self-employed and home carers.

PART 6 CONTRIBUTION COLLECTION Head 25 provides for the obligation on employers to correctly calculate, withhold and pay the employee’s AE contribution to the CPA and to calculate and pay the employer contribution to the CPA.
The rationale behind this is that the employer administers the payroll, and so is best placed to ensure that contributions are correctly calculated and deducted from the employee’s net pay.

Employers are already accustomed to dealing with the Revenue in relation to remitting income tax and social security contributions on behalf of their employees.

Business payroll systems have evolved to meet this requirement.
Therefore, from an employer’s perspective, this arrangement is most likely to ensure that administrative costs and burdens are kept to a minimum.

Given that the CPA will require access to Revenue real-time payroll to ascertain an employee’s eligibility, and as a compliance measure to check if the correct contributions have been paid by both employee and employer data (Head 28), this again begs the questions if the creation of a new collection agency is required.
PART 7: INDIVIDUAL ACCOUNTS Head 31 provides for the CPA to establish and operate a system of individual defined contribution accounts for each employee.

Ibec agrees that the pot-follows-the-member approach would improve persistency in saving and increase members’ sense of ownership of their retirement savings.
As argued above, an institutional structure such as that provided by the Revenue Commissioners could mitigate the complexities involved in supporting lifetime retirement savings, for example by providing portability as members change employment.

8 However, we have some concerns about the inflexibilities inherent in the proposed governance model outlined in Section 5 of the General Scheme (see above).
Under the original November 2018 Strawman proposal, it was envisaged that the Central Processing Authority (CPA) would collect contributions and remit them to AE ‘Registered Providers’ (RPs).

The contract for service would have been between the RP and the member.

Under the General Scheme’s proposals, the CPA will procure four investment managers/RPs, pool contributions on the basis of fund-type choice and allocate investment returns to contributors, based on a weighted average.
The proposed system is very rigid.

There can be no variation in the set contribution rates and there is no facility for AVCs or similar once-off payments.

This will inter alia exacerbate the gender pay gap – employees who take up caring duties and miss out on contributions will have no way to make good on them.

PART 8: INVESTMENT PROFILES AVAILABLE TO AE PARTICIPANTS Head 33 provides for the CPA to have a default investment fund, which will be linked to good practice for investment for retirement.
While participants will be able to choose a savings fund, in the absence of any savings decision, the enrolled employee will be automatically allocated to the default fund.

Head 34 requires the CPA to offer three alternative funds which employees may choose from: (a) a conservative, low risk fund; (b) a moderate risk fund; (c) a higher risk fund.

Ibec supports the rationale of offering a relatively small number of ‘standard choice’ funds to accommodate different risk/reward profiles.
However, we also note with concern research undertaken by the National Employment Savings Trust (NEST) in the UK which showed that 37% of automatically enrolled members favoured no risk whatsoever with their retirement savings.

This choice, except for some savers who are approaching retirement, will inevitably lead to an underperformance of savers’ investment funds and will have a negative impact on their retirement income.

Therefore, the choice architecture is particularly important.
The inclusion of a default low-risk fund option may appear to provide people who are risk adverse or unsure of the financial market with some confidence as to the security of the contributions made in their name.

However, this approach will be inappropriate for savers who have sufficient time to take a long-term view on market volatility in order to maximise their returns.
The General Scheme Explanatory Note suggests that ‘the CPA will need to provide information or even advice to employees, particularly if they choose to move their savings from the default fund.’ The pensions industry is in the best position to provide advice on ‘lifestyle’ and ‘target date’ funds, and the appropriate de-risking strategies.

PART 11 COMMUNICATION AND INFORMATION Ibec supports the proposal in Head 42 that the AE system is based on the ‘digital first’ approach to communications.
However, Head 43 provides little detail on what information will be given to employees upon their auto-enrolment into the retirement savings scheme, to help their understanding of the system and their choices within it.
While we welcome the proposal to establish an online portal (Head 44) and the issuing of an annual statement in line with best practice as laid out by the Pensions Authority and the European Insurance and Occupational Pensions Authority 9 (EIOPA) (Head 45), the communication strategy should explicitly acknowledge that a major barrier to undertaking any change in the pension environment is trust.
In recent years, the government has taken an untargeted suite of initiatives which have undermined trust in the pension environment.

The most serious of these with respect to AE’s introduction was the pension levy, which undermined trust from both employers and employees in government’s attitude toward private sector pensions.

It will be challenging to convince both participant groups that AE is not ‘just another tax’ given the €2bn taken from existing private pensions under the levy.
Given that employers and trade unions have a specific interest in AE and will be critical to its successful implementation and promotion, it is important that they have explicit role in the system.

The Labour Employer Economic Forum (LEEF) is the most appropriate mechanism to achieve this and its role should be formalised in the system’s advisory and communication structures.
PART 12 COMPLIANCE Heads 48 - 51 include proposals on the CPA’s right to make enquiries to employers, apply to the High Court for compliance orders, recover contributions, and for employers who fail to remit contributions to be liable to a penalty of €5,000.

Ibec supports the compliance objectives but has concerns about the proposed enforcement mechanism.
Ireland already has three independent, statutory bodies in this area: the Revenue Commissioners; the Workplace Relations Commission whose core functions include the inspection of employment rights compliance; and the Pension Authority which supervises compliance with the requirements of the Pensions Act, and regulates pensions schemes and PRSAs.
The General Scheme also proposes that the Central Processing Authority (CPA) will be prudentially regulated by the Pensions Authority (Head 56), ‘to protect the rights of employees and to ensure the stability and soundness of auto-enrolment retirement savings scheme’.

Therefore, using the CPA as an additional authority to specifically enforce employer compliance is unnecessarily bureaucratic and expensive.
PART 15 RETIREMENT BENEFITS Head 57 provides for the retirement age of the AE scheme to be linked to the State Pension age.

The Explanatory Note also refers to Strand 6 of the Roadmap for Pensions Reform 2018 – 2023 (Supporting Fuller Working Lives) which sets out the Government’s intention to facilitate older people in working beyond the ‘normal’ retirement age.

However, the General Scheme makes no provision for AE participants to continue contributing beyond the State Pension age.
Given that the Government has agreed that from January 2024, people will have the option to continue working up until the age of 70 in return for a higher State Pension, this inconsistency between the two systems is surprising and should be addressed.

The General Scheme states that it will take an estimated 10-15 years, for employees to accumulate pension pots of sufficient size to warrant the provision of CPA mediated pension drawdown products.
Head 58 proposes that the accumulated retirement funds will be provided to employees as a lump sum.

It suggests that as the AE system matures, consideration will be given to developing a set of pension drawdown options to be made available via the CPA.

However, this provision, once 10 again, highlights the risk of the unintended consequences in the decumulation phase of having two parallel systems.
PART 17 REVIEW AND EVALUATION Ibec has highlighted a number of rigidities in the proposed AE system in this submission.

Head 63 acknowledge some of these concerns by providing for the CPA after an initial 10–15-year bedding-in period to review a range of matters including: • broadening the system to include those outside the ‘employee’ cohort (e.g.
the self- employed and the non-working); • a framework for a more complex range of retirement savings products and pension drawdowns; • a facility for additional voluntary contributions over the minimum specified in law • an examination of how pension pots may be portable between the current pension systems and the auto-enrolment system (Head 66 acknowledges that, given the variation in the methodology for providing financial incentives between the two systems, it will not be possible for employees to transfer their assets from their current pension savings into their AE savings accounts).
While this may be the aspiration, Ibec is concerned that significant governance decisions made at this juncture will restrict these options.

It is also more likely that system’s shape will be embedded at an early stage and impervious to significant change.
TIMETABLE FOR ROLLOUT As highlighted above, Ibec acknowledge the significant progress has been made in agreeing the high- level principles of its design, which are reflected in the draft legislation However the introduction and roll-out of an AE scheme does not a clear roadmap.

Government has previously published a series of timelines which have been abandoned.
It is highly unlikely that the latest commitment of legislation enacted by Q3 2023 and commencement of automatic enrolments by Q1 2024 will be delivered.

Setting such a target in advance of the enactment of the legislation and the establishment of the required organisational structures takes no account of the political uncertainties and legislative timetables.
The UK Government legislated for its reforms – with some modifications - in the Pensions Act 2008 and started phasing in the reforms from October 2012.

Ibec is fully committed to the success of AE and sees no justification for slowing down the process unnecessarily.

However, business requires certainty on the detail of the scheme before the rollout can commence.

If it is not implemented effectively, this project could destabilise Ireland’s pensions and labour market environment for an extended period.
Therefore, certainty around the implementation roadmap, the design of the scheme and its implications should be comprehensive from the outset.

Ibec recommends that implementation should not commence until two years after the relevant legislation is enacted and the necessary administrative structures are established.

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