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Government prepares for pension auto-enrolment

At the contact centre for the new pension auto-enrolment system, My Future Fund, in Letterkenny, Co Donegal, staff were busy dealing with queries from employers.

Businesses have been able to register their details since the start of December ahead of the roll out of the scheme on 1 January.

So far, 81,300 employers with 666,000 employees have registered.

The scheme is designed to help around 750,000 workers to begin saving for their retirement.

All employees not already in an occupational pension scheme, aged between 23 and 60 and earning over €20,000 across all of their employments, will be automatically enrolled in the new scheme.

It will be gradually phased in over a decade, with both employer and employee contributions starting at 1.5% and increasing every three years by 1.5% until they eventually reach 6% by year ten.

The State will top up contributions by €1 for every €3 saved by the employee. This is in addition to the €3 that will also be contributed by the employer.

It is the biggest shake-up in Ireland's pension system in decades but Minister for Social Protection Dara Calleary said his department is ready.

"It's not just pension auto-enrolment, it's a revolution in retirement saving policy in Ireland," Mr Calleary said.

People sitting at desks in the My Future Fund Contact Centre
The National Automatic Enrolment Retirement Savings Authority has been established to run the system

"Will there be glitches? Yes. In the inevitability of a project as big as this, and a transformation as big as this, but we have minimised them to date and we will work to address them very quickly throughout January.

"But I would just say to people, you are now investing in your future and your future post-retirement will now be a lot more comfortable and stable because of My Future Fund and because of the contributions you are making now," he added.

Partner and Head of Employment Law at EY Law Ireland Deirdre Malone also believes there will be some glitches as the new scheme is rolled out in January.

"I think it's something new and it is 20 years in the making," Ms Malone said.

"We are all going to figure it out. There is a lot of information out there, but at the same time, there'll always be those unusual situations that arise," she added.

The Irish Congress of Trade Unions (ICTU) has welcomed the new scheme.

"Saving into a pension will be a big behavioural change for lots of workers and, given the large numbers of workers and employers coming under the scope of auto-enrolment, teething troubles can be expected in the early days," said ICTU General Secretary Owen Reidy.

A new body, the National Automatic Enrolment Retirement Savings Authority (NAERSA), has been established to run the system.

Employers have expressed concerns about the administrative burden of the new scheme but NAERSA said it will handle the bulk of the work.

"We manage signing up employers, registering them and getting payment details," said NAERSA CEO Dermot Griffin.

Donegal woman Edel Byrne speaking to RTÉ News
Edel Byrne said the new system 'is a very good thing'

"We'll also, as part of that process, bring through the portal, the eligible participants into My Future Fund, and our job is to collect the funds, add in the state contribution top-up, and then to pass it over to the three investment managers to invest it to get a good return for the participants," he added.

"There is going to be about 750,000 people that didn't have a pension that will have a retirement saving scheme from 1 January, and that's amazing," Mr Griffin said.

"Naturally, to bring on that volume of individuals in one big bang will present its challenges but we've a team in place that will work through any teething problems we have to make sure that the service works as it should."

"Ireland is the last country in the OECD to bring this in and it is so important, particularly for younger people, that they start saving at an early stage in their career," he added.

The Government has introduced new standards for pension schemes outside of My Future Fund to ensure they are at least as favourable for the participating employee.

In the case of a defined contribution occupational pension scheme, the standards specify the total contributions amount to at least 3.5% of the employee's gross pay, of which at least 1.5% must be made by the employer (subject to a maximum of €1,200) to exempt an employment from enrolment in My Future Fund.

Donegal man Declan McHugh speaking to RTÉ News
Declan McHugh is an employer and runs a small business in Donegal

A short distance away from the My Future Fund contact centre is Letterkenny town centre.

There we spoke to locals, both employees and employers, about the new pension auto-enrolment scheme.

Edel Byrne will be automatically enrolled on 1 January.

"I feel good about it, I actually wish I was in a pension ten years ago," Ms Byrne said.

"When you are younger you don't really think about these things," she said.

"I am 31 and I wish I had started when I was 18, I think this new system is a very good thing," she added.

Declan McHugh is an employer and runs a small business in Donegal.

"We're getting ready to get our employees signed up for the new scheme," Mr McHugh said.

"We have reached out to service providers to help us with some information on it and so far so good, it is something new so it is a bit different."

"Yes, there is an extra cost for employers that will increase over the years but I think overall it is a good scheme and I think in the long run we will be encouraging our employees to stay in it," he added.

Workers who are auto-enrolled can opt out after six months but the government is hopeful that they will stay the course and see it as an investment that their future selves will thank them for.