Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697803863686.pdf (Ireland)
Developing an Automatic Enrolment Retirement Savings System for Ireland Joint Oireachtas Committee on Employment Affairs & Social Protection 11th OCTOBER 2018 Elements of Automatic Enrolment already confirmed by Government • AE will begin by 2022 • Supplement the State pension & complement existing private provision • Earnings related workplace savings system - employees can opt-out • Defined Contribution (DC) model with personal accounts • Employees, employers and the State each contribute • System will facilitate, but not demand, member choice 2 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Elements of Automatic Enrolment for Consultation • Operational structure & governance • Target membership – who will be automatically enrolled • Employee & employer contribution rates • State financial incentive • Providers, savings/investment options & default processes • Member opt-out, re-enrolment & ‘Saving Suspension’ periods • Income draw-down/pay-out phase options 3 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Why Automatic Enrolment?
4 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Target Retirement Income Replacement Rates • Lower incomes need to replace a greater share of earnings to maintain living standards.

• People on lower incomes have a greater share of earnings replaced by the State pension.

• Average earnings of €38,000, the State pension replaces 34% earnings.

DEASP estimate approx.

60% is needed.


• Lower incomes consume a greater proportion of their disposable income.

Affordability?
Affordability?

5 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection 6 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection 7 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection So…Automatic Enrolment – but what is the policy objective?
To supplement the first pillar (State pension) and enable people to maintain, to a reasonable degree, the standard of living enjoyed whilst working, for the duration of their retirement years.

The AE system should be designed in best interest of members, and members alone, to maximise retirement incomes for individuals.

8 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Here are some challenges facing Irish employees preparing for retirement…..
Saving late and saving inconsistently Making poor/uninformed investment decisions Comparatively high fees Low confidence and trust = Disengagement Not utilising/maximising State incentives Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 9 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Finding suitable products Benefits of a high quality organisational framework like Automatic Enrolment Makes saving easy and automatic Professionally selected investment choices including a ‘Default’ option.
Reduced member charges due to large numbers (economies of scale) Fiduciary responsibility on ‘Registered Providers’ with a legal duty to put members’ interests first Portable ‘Pot Follows Member’ approach Body Level One Body Level Two Supervision and regulatory capacity 2.33 times retirement ‘bang for buck’ over lifetime Body Level Three Body Level Four Body Level Five 10 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Central Processing Authority 11 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Central Processing Authority For the employee…… • Easy/Automatic – CPA acts as agent for the member • Should engineer in improved system governance, administration, communication, investment outcomes • Limited ‘Registered Providers’ – though provides choice • Economies of scale - 0.5% absolute max member charge • Where employee feels unwilling/unable to choose, a ‘Default’ choice is made on their behalf • Pot-follows-member capability (PPSNs / MyGovId.ie) 12 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Profile of AE employers?
For the employer……legitimate concerns • Cost Base – direct and indirect • HR/IR and administration • Finance and/or payroll infrastructure • Expertise and/or responsibility/liability • Wider economic impact 13 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Employers • Minimise administrative burden wherever possible – no scheme responsibilities.
• Scale & technology reduce service cost for small/micro employers • Statutory duty to register & pay contributions • Contributions via payroll to any Registered Provider via member’s unique identifier • Regulatory supports • Contributions deductible for corporation tax purposes • Employer engagement – particularly aware of small employer needs • Critical test – easy to operate for employers?
14 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Registered Providers • Fiduciary duty – act in member’s best interests • Invited to tender to become AE ‘Registered Providers’ • Duty to deliver services to all who enrol • Offer limited number of ‘standard choice’ fund/savings options with 1 default • Employee selects ‘Registered Provider’ and fund option • If not, defaulted on a carousel basis • ‘Registered Provider’ status will be time/condition bound 15 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Target Membership • Employees aged 23 - 60 and earning €20,000+ p.a.
• No waiting period • Opt in for employees outside of this criteria and for self- employed (and employer/State contributes) • Existing savers in schemes that meet minimum criteria will not be enrolled • Significant further analysis necessary – gender impact, non- nationals, carers, self employed etc.
16 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Contribution Rates • Employee/Employer low base 1% of gross in 2022 - €75,000 • Auto-escalating annually to 6% in 2027 • State ‘Saver’s Bonus’ of €1 for every €3 member contribution to a prescribed cap • Economic impact and opt-out analysis required • AE must set realistic expectations from the outset 17 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Investment Options • 4 Registered Providers – 3 ‘Standard Choice’ fund options • 1 ‘Default Fund’ per Registered Provider • Varying Risk Profile – Low, Moderate, Medium • Target Date Funds – Lifestyle de-risking Opt-Out and Re-enrolment • Member ‘opt-out window’ 7th and 8th month • Re-enroled every 3 years • May be conditional ‘Saving Suspension’ periods 18 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Benefits and the Pay-Out Phase • Policy Objective – income “for the duration of the retirement years”.
• Drawdown access at prevailing State pension age • Registered Providers will offer standard decumulation options • May be a minimum level of annuitisation • Small pots taken as lump sum 19 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Timeline 02/2018: A Roadmap for Pensions Reform 08/2018: AE Strawman Consultation 2019: 2020: 2021: 2022: Government decisions on design of AE AE legislation and implement structures Implement structures First employee and employer registrations for AE We are here 2017 2018 2019 2020 2021 2022 20 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Strawman Consultation Activity • Invitation for submissions – Nov 4th • National & Local Print Media/Radio ads • Full briefing material made available on welfare.ie • Regional Public Consultation Fora – Cork/Galway/Dublin • autoenrolment@welfare.ie and phoneline for any AE queries • Briefing session for Oireachtas members • Meetings with sectoral interests, representative bodies, employer and trade unions reps. • National AE Conference (post consultation assessment) 21 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Let us know your views You are invited to submit your views in writing by the 4 November 2018 by either emailing or writing to us.
Email: autoenrolment@welfare.ie Address: Automatic Enrolment Programme Management Office Department of Employment Affairs and Social Protection Floor 1, Áras Mhic Dhiarmada Store Street Dublin 1 D01 WY03 Further information: http://www.welfare.ie/en/Pages/Consultations.aspx 22 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 23 An Roinn Gnóthaí Fostaíochta agus Coimirce Sóisialaí | Department of Employment Affairs and Social Protection