Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697803802674.pdf (Ireland)
Submission to Joint Committee on Social Protection, Community and Rural Development and the Islands – General Scheme of the Auto Enrolment Retirement Savings System Ir i sh In s ti tu te o f Pen s io n s M a n a gem en t ( II PM ) No ve m b er 20 22 About the IIPM Founded in 1990, the primary objective of the Irish Institute of Pensions Management (IIPM) is to promote professional standards amongst those working in the field of pensions, with education being central to the achievement of this objective.
Today, we pride ourselves on the high quality and relevance of our qualifications and services.

In turn, employers recognise the value of the IIPM's qualifications and have benefited from the increased expertise of their staff.

There have been many developments in pensions in recent years as a result of domestic and international influences.
Legislative changes, increased emphasis on governance and compliance, products developments and European Union influences means that pension practitioners must work harder to keep informed.

The IIPM education programmes are relevant and rewarding for both students and employers.

Students will have a clear path to follow as they progress through their pension careers.
Executive summary The IIPM welcomes the opportunity to make a submission to the Joint Committee on Social Protection, Community and Rural Development and the Islands, though it notes that the timeline for submitting feedback was surprisingly short on this occasion, particularly when we consider that AE is something that has been under consideration for many years.

As a result, our submission is perhaps a little more concise than if there had been more time to respond.
The IIPM welcomes the publication of the AE Bill and believes that the introduction of auto enrolment will drive a cultural change within Ireland, enabling improved pension coverage, adequacy, and retirement outcomes for all.

However, the AE Bill sets out a model which fundamentally differs from that set out and consulted upon in the Pensions Strawman.
The Strawman had as a core principle the need to provide choice to consumers, in respect of providers, professional advisors, contributions, investment strategies and investment managers.

Many elements of choice have been removed from the proposals as set out within the AE Bill with the creation of a State monopoly.

Similarly, a key element within the Pension Roadmap was that the introduction of AE should not de-stabilise existing occupational and private pension arrangements.
A number of the proposals set out within the document would seem to contradict rather than complement this proposal.

The added complexity also contradicts the principle of simplicity in the government’s own Interdepartmental group paper.

The current model proposed may add additional cost, uncertainty and complexity to the landscape that exists today.

Submission We have broken down our submission into a number of different sections which broadly follow the sections of the AE document.
Participants We note that the proposals may increase the gender pension gap by excluding those on incomes of under €20,000 per annum.

This will remove more women than men from the scheme.

In addition, whilst there is a concept of pot follows member there is an absence of detail on what would happen with gaps in employment or unpaid leave, or how members can make up for lost time with additional contributions (as outlined below).
Contributions and incentives There appears to be very little flexibility for contributions.

The current age-related limits in place for occupational and private pension arrangements recognise the need for pension savers to make up for gaps in the provision as the get closer to .

retirement.

There is no flexibility in the proposals to cater for this.

The State top-up is fundamentally different to the current tax relief system that is in place today and will add complexity to the pensions market.
We also note that the onus has now been placed on employers to calculate required contributions – this differs to the Strawman proposals and will make it more complicated for employers to manage employee benefits.

The Central Processing Authority (CPA) The creation of the Central Processing Agency to act as the State monopoly on auto enrolment is the largest and most fundamental change to the proposals as set out within the Pensions Strawman.
The Pensions Strawman had a proposal for there to be four private registered providers who would provide choice, flexibility and options to consumers by using their extensive pensions knowledge, experience and systems.

Charges would be capped at 0.50% of assets annually, services levels would be set out in legislation and customers could choose their provider based on service, fund choice and member engagement.

All costs of establishment would rest with the four chosen providers.
No cost benefit analysis has been provided as to why a new State monopoly has been created and why existing pensions systems already within the market could not be re-utilised as envisaged within the Pensions Strawman.

There is also a danger that as customers will have little to no choices or flexibility that they will not engage with their pensions pots and will merely see it as another form of tax.
Individual accounts While it is stated that the CPA will maintain individual accounts and that the Minister will make regulations on this basis no further information is provided.

The AE scheme should be subject to all the same regulatory protections and governance as all defined contribution occupational pension schemes.
This level playing field between AE members and occupational scheme members should be clearly set out within the AE bill and should include all the same disclosures that those to apply to occupational scheme members.

If the CPA is to act as the State monopoly it should afford scheme members all the same information they would have received from pensions providers.

Investment: Choice, suitability assessments, and the importance of advice.
Investment advice should be offered to all AE members to allow them select the most appropriate fund for their age, gender, financial position and circumstances.

The default fund should take into account the age profile of members within its parameters and include life-styling concepts similar to those utilised already by pensions providers.
There is no specification within the AE bill of any advice being provided by the CPA to members of AE of what strategy they should follow based on their own personal situation and needs.

Best practise for pensions providers is to offer an assessment of members needs and risk preferences and assist them with advice on their investment options.

Retirement benefits The draft Bill suggests that all AE benefits be made available as a lump sum for a temporary period.
This is very different to pension rules that exist today.

The argument that this is purely a temporary measure and hence immaterial is not sound.
Anyone considering joining a scheme for the first time will be considering the options in front of them; if all benefits can be taken as a lump sum at retirement, this:  Puts existing arrangements at an immediate disadvantage (save for those that can take all benefits via salary and service LS)  Does not address longevity risk if consumers have access to all of their retirement savings at the point of retirement Pension adjustment orders are not mentioned in the AE document – there is no proposal on how these may be dealt with under the scheme.
Transfers Head 66 of the document prevents the amalgamation of pension funds and effectively prevents Pot follows the member.

Currently within many pension arrangements, savers can choose to consolidate their contributions into one pot pre retirement.

This simplifies their retirement view, allows ease of reporting and managing their own retirement income expectations.
Closing The IIPM would like to thank the Committee for providing the opportunity to set forwards its views on AE and welcomes the legislative scrutiny and debate that will be carried out in due course when reviewing this landmark policy.