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Lower auto-enrolment minimum age – committee

An Oireachtas committee has made 21 recommendations on legislation that will introduce a system of auto-enrolment for pensions.

These include a lowering of the age limit for participation in the scheme, from 23 to 16, to align it with the minimum-age threshold for PRSI.

The recommendations are contained in a report from the Joint Committee on Social Protection, Community and Rural Development and the Islands that followed pre-legislative scrutiny of the Automatic Enrolment Retirement Savings System Bill.

Concern for young workers

Under the auto-enrolment plan, employees aged between 23 and 60 who are earning at least €20,000 a year, and do not already have a workplace pension, will be automatically signed up to a savings scheme co-funded by their employer and the State.

They will have the ability to opt out or suspend contributions.

The committee’s report recommends that the lower income threshold of €20,000 be removed, as it believes the current level could penalise young workers and low earners, and would “disproportionately” affect women.

Investment advice

Among the other key recommendations are:

• When participants are auto-enrolled, they should be given a sample of the likely pension they will receive on retirement in real terms by adjusting for inflation,
• Annual “evidence-based” reviews of governance of the scheme,
• Investment advice should be offered to all scheme members, to allow them to select the most appropriate fund for their age, gender, financial position, and circumstances,
• Clarity on the form of taxation to be applied to pension pots in retirement,
• An examination of whether there should be a mandatory minimum of pension funds from the scheme invested in Ireland,
• Investment funds should be prohibited from investing in fossil fuels or the arms industry,
• A minimum percentage of the funds should be invested in Irish renewable energy developments,
• A two-year lead-in period after the signing of the bill, to allow business to be ready for the implementation,
• The total amount of all charges should equate to a maximum of 0.5%,
• The Department of Social Protection should “carefully consider” tax relief in the bill, and its impacts on the wider pension system,
• The State Pension should either be statutorily linked to the Consumer Price Index, or a percentage of the living wage.

Committee chair Denis Naughten (pictured) described the bill as “an important piece of legislation”, designed to simplify pension decisions for workers, and make it easier for employers to offer a workplace pension.