Irish DSP defends six-month opt-out regulation for AE

Ireland’s Department of Social Protection (DSP) assistant secretary general, Tim Duggan, has defended the decision to not allow people to opt-out of the forthcoming auto-enrolment pension scheme until after they have been enrolled for six months.

Speaking at the Irish Association of Pension Funds (IAPF) Summer Conference today, 2 May, Duggan was asked about the six-month rule, which was set out in the Automatic Enrolment Retirement Savings System Bill 2024 published in April.

Duggan said the DSP has always sought to “strike some degree of balance”, during a Q&A session at the conference with IAPF CEO, Jerry Moriarty, as he added that there’s “no such thing as right answers with most of the perimeters around auto-enrolment”.

“What there is, is a spectrum of possible outcomes, so you can be at one end of it or the other but what we have always sought to do is try to be as close to the middle as we possibly can be… The opt-out – you could do what the UK does, which is to allow somebody to opt-out 60 seconds after they have been enrolled, or you could do what the Australians do, which is to never allow people to opt-out. They’re the extremes of the spectrum and what we are trying to achieve is how we decide where it is going to be.”

Elaborating, he said analysis by the DSP has shown that people typically only understand how something works really when they see it in action.

“You can tell somebody that auto-enrolment means that they are going to have a retirement savings pot at the end of their working life. You can tell them that they are going to get a whole load of free money. You can tell them that if they put in €3 then that will become €7 automatically. That sometimes gets a bit of interest but not enough to sustain a practice.

“What actually sustains a practice is somebody looking at their account and seeing this massive level of accumulation in a relatively short period of time. What you tend to find is that even though people have known that all along, they are amazed when they see it. It makes a huge difference to their perception of the system if they can see in a relatively short piece of time, their contributions have grown significantly.

“That’s why the six months was chosen, to give people that perspective and a much shorter time period wouldn’t, and we didn’t want to go for mandatory because the government [didn’t want that].”

However, he acknowledged there will probably be a debate around the opt-out period and accepted it will “land where it will land” but he is comfortable that the rationale behind six months is there.

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