Auto-enrolment pension legislation finally introduced in Dáil 25 years after it was first discussed

Some 800,000 workers will be brought into a scheme for the first time, but Sinn Féin says NTMA should manage new initiative and not private pensions sector

Legislation on auto-enrolment of workers in a pension plan has finally been introduced in the Dáil, 25 years after it was first mooted.

Minister for Social Protection Heather Humphreys said the legislation will pave the way for about 800,000 workers to be brought into a retirement scheme for the first time.

But Sinn Féin said it cannot support the legislation as it is a “high risk” gift to the private pensions sector and should be managed by the NTMA.

Opening the debate Ms Humphreys said Ireland is the only country in the OECD that does not have some form of mandatory pay-related retirement savings scheme and “has been an outlier in terms of pension coverage for too long, but this is now going to change”.


Implementation of the Automatic Enrolment Retirement Savings System legislation is “probably the single biggest reform of the pension system in the history of the State”, she said.

The Bill is the “culmination of years of policy development, consultation and discussion” and paves the way for around 800,000 workers to be brought into a retirement savings scheme for the first time.

The Minister said it is needed because pension coverage and pension adequacy, particularly in the private sector, is too low with only an estimated one third of private sector workers contributing to a pension scheme and two-thirds effectively totally reliant on the State pension.

She stressed however that “the State pension is and will remain the bedrock upon which the Irish pension system is founded”.

Under the new system people will have to consciously “opt-out” rather than “opt in” and in other countries the numbers opting out are very low.

Employees aged from 23 and 60 and earning over €20,000 a year who are not already in a pension scheme will initially be enrolled.

They can opt-out or suspend their contributions after a mandatory six-month participation period but will be brought back into the scheme after two years unless they have another pension arrangement.

She said she had listened to the concerns of businesses and contribution rates will be phased in gradually over a period of 10 years. Employees will contribute 1.5 per cent of gross earnings which will be matched by employers and topped up by the State.

Rates will increase every three years to a maximum rate of 6 per cent each from employee and employer, and 2 per cent from the State from 2034 onwards.

The State will also provide a top-up of €1 for every €3 saved by the worker. This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined, resulting in a total saving of €7.

Ms Humphreys estimated that a worker on the national average wage contributing consistently for 40 years could build up a savings pot of approximately €750,000.

A new State body, the National Automatic Enrolment Retirement Savings Authority will also be established to oversee the scheme.

Sinn Féin social protection spokesman Donnchadh Ó Laoghaire said his party could not support the legislation because they were concerned it was not built on “strong foundations”.

The party feared that “this approach will be a gift to the private pensions industry and we will face significant risks for many workers who will rely on the auto-enrolment schemes in future”.

He said that during the Celtic Tiger years many people found out that the pensions they had paid into for a long time “weren’t anything like what they had imagined them to be”.

Mr Ó Laoghaire said the fund “will be worth an enormous sum” and “should be managed robustly and with the certainty of an adequate and worthwhile pension in retirement”.

“Our very strong preference is that the NTMA, which is already responsible for managing several funds, including some recently announced by this Government, would be responsible for managing these funds and investing them to the benefit of citizens,” he said.

“Rather than focusing on its own profits, the NTMA would prioritise the financial wellbeing of citizens’ contributions to ensure their comfort in their old age.”

But “under this proposal, contributions will be collected and handed over to the private pension industry”.

Labour spokesman Duncan Smith said his party had reservations about some aspects of the more detailed elements, but was broadly supportive.

But he said he would welcome an assurance form the Minister that safeguards will be put in place to “ensure that this new retirement savings scheme will be in addition to the State pension so that at no point can some future Government unilaterally decide to make it a replacement”.

He said the 2022 census data shows that about 20 per cent of those beyond retirement age live in relative income poverty, about 145,000 pensioners.

Since Britain brought in auto-enrolment in 2012, “they increased pension coverage from 47 per cent to 78 per cent and massively changed their pension landscape”, he added.

Marie O'Halloran

Marie O'Halloran

Marie O'Halloran is Parliamentary Correspondent of The Irish Times