Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697804155240.pdf (Ireland)
Opening statement by Dr Laura Bambrick, Irish Congress of Trade Unions to the Joint Oireachtas Committee on Social Protection.

7th December 2022 Chair, Deputies, Senators On behalf of the Irish Congress of Trade Unions I would like to thank the Committee for the invitation to input in to your pre-legislative scrutiny of the Automatic Enrolment Retirement Savings System Bill 2022.

I am accompanied by my colleague, Liam Berney.


Ireland is the only country in the OECD without a mandatory pay-related pillar for retirement savings.1 ICTU has long argued that our voluntary approach has failed.
Little over half (56%) of all workers have a workplace or private pension to supplement their State pension - 90% of public sector workers do, compared to one in three workers (35%) in the private sector.2 As the contributory State pension is paid at a flat €253.30 a week, rather than as a percentage of previous earnings, workers without a supplementary pension are exposed to a significant drop in their normal living standards in retirement.
The Bill, when enacted, will legally require employers to automatically include all employees who satisfy certain criteria into a pay-related pension savings scheme and to make a minimum contribution.

Contributions will also be made by the worker and topped up by the State.

ICTU supports the introduction of auto-enrolment as a means of increasing income adequacy for workers in retirement and obligating employers to contribute to securing their employees’ living standards in old age.
Pension savings also reduce the risk of a fall in consumer demand.

Over the coming decades, the importance of this income to the wider economy will grow as the population ages.

The amendments put forward by ICTU to the Bill, detailed at length in our written submission to the Committee (see here https://bit.ly/3gYdIoC), aim to deliver a fit-for-purpose scheme.
In the brief time I have available for my opening remarks, I will concentrate on our recommendations for improving coverage, contributions, and confidence in the scheme.

1 OECD (2014) Review of the Irish Pensions System.

2 CSO (2022) Pensions Coverage Survey 2021.


Page 1 of 3 Coverage Under the proposed scheme, automatic enrolment will apply to all employees aged between 23 and 60 years3; and earning at least €20,000 a year across all employments; and not an existing member of a workplace pension scheme or one that meets the minimum contribution requirements.

ICTU recommends that young and low-paid employees and sole traders also be automatically enrolled.
That the self-employed will not be obliged to comply with the auto-enrolment rules is a cause for concern for ICTU.

Aside from the low pension coverage among the self-employed, introducing a compulsory employer contribution will further increase the financial incentive for unscrupulous employers to misclassify employees as self-employed.
ICTU recommends self-employed workers with no employees be automatically enrolled, and to make the business they provide work or services to liable for an employer contribution.

This mirrors Suggested Approach 1 in the Department’s review of bogus self-employment.4 ICTU also rejects the proposal to restrict auto-enrolment to workers aged over 23 years and recommends that the age trigger be aligned with the PRSI minimum age threshold of 16 years.
A worker could have seven wasted years between ages 16 and 23, when they have started their working lives but are not saving towards a more financially secure retirement.

ICTU recommends there be no lower income threshold.

It is our view that including a limit before compulsory retirement savings kick-in runs the risk of unintended consequences.

For workers, in the form of income-cliffs and employment disincentives.
That is, if working more hours, taking a promotion or a new job brings earnings over the income limit it can result in less take-home pay.

For employers, it increases the incentive to keep wages below the threshold so as to avoid the obligation to contribute to their employee’s pension pot.

Contributions The proposed scheme provides for a total minimum contribution of 14% of the wage between employer, employee and the State to be gradually introduced over a 10-year period.
Employees will be required to make a minimum contribution of 6% gross earnings to the scheme.

Employers will be required to match the minimum contribution on behalf of their employee, subject to an annual earnings cap of €80,000, which is deductible for corporation tax purposes.

The State will contribute €1 for every €3 an employee saves, with the pro-rata matching also subject to a €80,000 maximum earnings cap.

3 60 is the proposed upper age limit for new entrants.
Workers enrolled before they turn 60 will continue to be covered by auto-enrolment up to the State pension qualifying age.

4 DSP (2018) The use of intermediary-type structures and self-employment arrangements: Implications for Social Insurance and Tax Revenues p.28 Page 2 of 3 ICTU recommends that the State contribution should mirror the value of the current 40% tax relief arrangement.

That is, it should be increased to €1 for every €2.50 a worker saves.
To make auto-enrolment attractive and affordable for low-wage workers, ICTU recommends the employee contribution be graduated up to €20,000 and a flat 5% on all additional earnings ICTU recommends the employer contribution be raised to 7%.

A 7% employer pension contribution together with the 11.05% employer social insurance contribution will still be below the EU average.
The 5:7:2 ratio has the added benefit of upholding the established principle in collectively bargained pension schemes of the employer contributing more than the employee to the pension pot.

Employers who already contribute into good workplace pensions will welcome that their competitors are obliged to move even further towards doing likewise, as this will reduce the competitive advantage of lower labour costs.
Confidence This new retirement savings scheme will be in addition to, not in place of, the State pension.

The Roadmap for Pensions Reform (2018) commits to formally setting a benchmark of 34% of gross average earnings for the contributory State pension.

ICTU views this as essential for public confidence that auto-enrolment is not intended to dilute or displace the State pension as the bedrock of the pension system over time, and calls on Government to deliver on their commitment as a matter of urgency.
Under the proposed scheme, workers will have access to a range of retirement savings investment funds from approved commercial providers, with access to these providers mediated by the State via a newly established Central Processing Authority (CPA), which will be statutorily independent in the exercise of its functions.

Individual trust and confidence in the management of their pension savings is vital to building widespread support for and confidence in this radical new policy departure.
The Irish public remain understandably wary of the charges and fees levied on retirement savings and poor investment decisions.

While the pension levy is still fresh in the public memory, strong legislative protection for the fund from raids by future governments can help rebuild damaged trust.

ICTU rejects the proposed maximum annual management fee, viewing 0.5% as excessive and recommends it be revised downwards and that the total charges and fees over the lifetime of the pension be capped.
We further recommend trade union representation on the CPA board.

ICTU has long advocated for concrete action to address the alarming low levels of second tier pension coverage in the private sector.

The draft legislation setting out the design principles for an automatic enrolment retirement savings scheme represents a significant step towards achieving this objective.

I would like to thank you for your attention and we are happy to take any questions.

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