Irish AE has ‘no intention of undermining occupational schemes’ – DSP

Ireland’s auto-enrolment (AE) pension system has “no intention of undermining occupational schemes”, the Department of Social Protection (DSP) assistant secretary general, Tim Duggan, has said.

Speaking at the Irish Association of Pension Funds (IAPF) Summer Conference yesterday in Dublin, Duggan said he has seen no evidence that AE causes damage to occupational pension schemes.

“There’s no intention of undermining occupational schemes. In fact, I’ve seen no evidence that auto-enrolment does cause damage to occupational schemes. If anything, it seems to enhance them because for that very reason, people become more aware of them and more willing to engage with them and employers can push them a bit more… we’re hoping that something similar to that will happen.”

In addition, Duggan said he was “perplexed” when employers say they don’t want to have to deal with providing AE and their own occupational pension scheme and would rather offer their current pension scheme to unenrolled employees over offering AE.

“It’s not like having a pension scheme… you don’t have to set up trustees, you don’t have to provide advice, you don’t have to do any of those things. I’m always a little perplexed as to why this is a big thing. When people ask that question, it’s usually, ‘why doesn’t the auto-enrolment legislation compel people to join their occupational scheme?’ – essentially is what is meant by that,” he said.

To this, he said there were a “whole load of issues”, such as occupational schemes all being different, “so how are we to know whether that is the right thing for someone”.

He continued: “The second thing is the rules around those occupational pension schemes can be different. The third thing is that there is a contract of employment, and we wouldn’t be privy necessarily to the terms and conditions and caveats that are in that contract. I would have thought that in the majority of cases, employers if they had a good scheme should be able to convince their employees that they should be joining them.”

Furthermore, Duggan said that if the government was going to introduce this as an option, it would have to be done on a like-for-like basis.

“The occupational scheme would have to have facilities and features that mirrored auto-enrolment. It would have to have the ability to opt out after six months and so on. I don’t think that’s realistic. It hasn’t been included in this legislation; nor will it be because it’s not possible to do. If it becomes a major issue, then obviously it could be looked at down the road, but it walks across at least seven different pieces of legislation that I’m aware of.”

When asked about the process for people who decide they want to leave the AE system and join their employer’s occupational scheme, Duggan said they can “provide us with evidence that they are joining the scheme and therefore we will allow them to suspend their contribution into AE”.

In response to this, fellow conference speaker, Irish Life director of corporate partnerships, Shane O’Farrell, said he was “concerned”.

“My understanding was once they automatically joined a DC plan, AE would automatically stop. I think that’s a very significant change of view I’ve heard, and I would be interested in exploring that much more. Particularly because most DC plans, with their contribution rates and structures, are more generous than AE… I would be very concerned if people ended up being stuck in AE at a lower contribution rate and not be able to avail of a more generous employer occupational scheme.”

He also said it is important that current occupational schemes, which have over 500,000 members combined, are not damaged in any way. He also criticised the methodology that the government has developed to introduce AE to Ireland.

“I think everybody in this room would agree some form of AE is the right thing to do for Ireland. A lot of people in this room would disagree with the exact methodology Tim and the department have gone about implementing it. Tim talks about how busy they are, and how intense it is, and I think he’s right. It is very intense, but to some extent, they have chosen the most difficult and complicated way to achieve this.”

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