Latest News

Below you will find all the latest news and updates from IAPF.  

Long-awaited plan to force workers to pay into a pension

23/08/2018 Posted by IAPF | Comments(0)

Workers will be forced to contribute to a new pension scheme in four years' time, Social Protection Minister Regina Doherty has insisted.

The alternative is that thousands of workers will see their standard of living fall dramatically in retirement, she said.

The scheme will see workers contributing up to 6pc of their wages, with that amount matched by employers. The State will contribute €1 for every €3 put in by workers.

Two decades after an auto-enrolment system was first muted, Ms Doherty said the only thing that would stop it happening was "something earth-shattering".

Auto-enrolment will be introduced on a phased basis from 2022. It is aimed at low to middle-income earners who do not have private pensions. It will apply to 410,000 workers.

Details on how the much-delayed, auto-enrolment scheme might work were outlined by Ms Doherty, who promised there would be no more delays delivering the new retirement scheme.

The State has been considering a pension plan for low and middle-income earners for 21 years now.

It was to be introduced in two years' time, but Ms Doherty has promised it will be in place in four years' time.

Less than half of all workers have an occupational or private pension to supplement their State pension. Almost all public sector workers have an occupational pension.

However, just one-third of workers in the private sector have a personal pension. This amounts to around 900,000 workers.

The Government fears that many of these workers will face poverty in retirement.

The latest proposal on the new auto-enrolment scheme sets out how such a scheme might work.

The public has been invited to respond to what is being called a "strawman proposal", setting out the mechanics of how the new scheme would work. A strawman proposal is one where options are set out with people invited to knock them down or agree with them.

Auto-enrolment will be introduced on a phased basis from 2022 and is aimed at low to middle-income earners who do not have private pensions.

Ms Doherty said Ireland was just one of only two countries in the Organisation for Economic Co-operation and Development (OECD) without a mandatory pension scheme.

"It is increasingly evident that most Irish workers are not saving enough, or indeed at all, for their retirement years," she said.

"Many people will be faced with a serious reduction in their living standards when they retire - a fall in income they clearly do not want."

The Irish Congress of Trade Unions (ICTU) welcomed the detailed proposals on how the new scheme might work being published.

Dr Laura Bambrick, of the ICTU, said there was a need for statutory penalties to ensure workers were not encouraged to opt out of the scheme by unscrupulous employers trying to classify them as self-employed.

Jerry Moriarty, of the Irish Association of Pension Funds, which represents trustees, said the contributions from employees would start at 1pc of wages each. But this goes to 6pc from each after six years.

"That's very aggressive and likely to have a significant impact on the economy," he said.

He said the Government was proposing to set up a Central Processing Authority that would collect contributions from employers and also allocate a pension provider to employees who don't want to choose themselves.

But it was unclear how much this will cost or why it is needed.

Ms Doherty described herself as "very lucky" to be the minister who got to act on two decades of talking about pension reform.

"We are having an automatic enrolment system for the Irish people. Not because I say it's a good thing, but because ministers starting back as far as 20 years thought it was. We're at the end game of that process now," she said.

The minister said the only way the plan could be derailed was if there was "something earth-shattering" between now and 2022.

Asked about the cost of the technology required to operate an auto-enrolment system, Ms Doherty said there were no firm costs yet.

"It will take probably 18 months for us to devise an IT system capable of interacting with the Central Processing Authority, registered providers and the hundreds of thousands of people who are going to enrol," she said.

 

Read the original article here

Add a Comment

Name:
Email:
Notify of New Replies:
Add a new comment:

Important information regarding cookies

This site requires cookies, which are small text files that the site puts on your computer, to operate. These cookies help us provide a better service to you. We use these cookies to track general user traffic information and to help the site function properly. Cookies are used by approximately 92% of all sites on the internet.