Historic Automatic Enrolment Legislation passed by Dáil

Bill will now be sent to the President for enactment
Tata Consultancy Services (TCS) named as preferred bidder to manage AE system following public procurement
Approximately 800,000 workers to be enrolled in 2025

The Automatic Enrolment Retirement Savings System Bill 2024 has been passed by both Houses of the Oireachtas and will now be sent to the President to be enacted.

The Bill provides for a new retirement savings scheme for workers who are not already members of a pension scheme. It aims to increase pension coverage and overall pension adequacy in Ireland. Ireland is the only OECD country that does not yet operate an Auto Enrolment or similar system as a means of promoting pension savings.

The Bill also establishes an independent public body, the National Automatic Enrolment Retirement Savings Authority, to administer the system and ensure compliance, under the aegis of the Department of Social Protection.

Tata Consultancy Services (TCS), a leading global IT services, consulting, and business solutions organisation, has been selected as the preferred bidder to provide this administration as a managed service.

The Authority will identify and enrol participants, collect and pool contributions, arrange for the investment of contributions, manage participant accounts including opt-outs, suspensions and opt-ins, and facilitate the payment of savings at retirement. This will mean employers will have minimal administrative work in relation to Auto Enrolment.

TCS has been the pensions administration provider for NEST in the UK since 2011. Although distinct in design, NEST (the National Employment Savings Trust) is the UK Government’s equivalent of the Auto Enrolment Scheme. It currently services approximately 13 million participants.

TCS has a global delivery centre based in Letterkenny, Co. Donegal, which employs close to 1,400 people and provides a variety of services including pension administration, cyber security, IT support, and customer service.

Commenting at the passing of the Bill, Minister Humphreys said:

“Auto-enrolment is a truly transformative policy that I am proud to deliver for Ireland. It will make sure that hard working men and women across the country will be able to save for their future, with help from their employers and the State. I am delighted that this historic legislation has now passed both Houses of the Oireachtas and look forward to it being enacted shortly.”

Minister Humphreys continued:

“I am also pleased that we have concluded the procurement process to source a managed service for the provision and operation of the Automatic Enrolment Retirement Savings Scheme and look forward to engaging with TCS as our preferred bidder for these services.”

The Minister added:

“Auto Enrolment has been talked about for decades – now it is finally happening. With the completion of these two major milestones, the AE train is fast approaching its destination and we are very much on track for delivery of this landmark initiative for the people of Ireland.”

Notes:

Key features of the scheme include: -

1) Phased Implementation

All employees not already in an occupational or equivalent pension scheme, aged between 23 and 60, and earning over €20,000 across all of their employments, will be automatically enrolled.
With the first enrolments set to happen in 2025, the introduction of Auto Enrolment will be very 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 10 (2034). This steady phasing allows time for both employers and employees to adjust to the new system.

2) Saving Supports

Matching contributions will be made by employers to those contributions made by employees up to a maximum of €80,000 of earnings.
The State will also top up contributions by €1 for every €3 saved by the employee, up to a maximum of €80,000 of earnings. This is in addition to the €3 that will also be contributed by the employer.
This means that for every €3 saved by an employee, a further €4 will be contributed to their pension pot by their employer and the State – that is every €3 contribution by an employee automatically grows to €7 before it is invested.
These employer and State contributions will incentivise people to stay in the Auto Enrolment system and will reduce the cost to individuals of saving for retirement.

3) Choice

The system will be voluntary but will operate on an ‘opt-out’ rather than an ‘opt-in’ basis.
Eligible employees will be automatically enrolled/ ‘opted-in’ but will have the choice after six months’ participation to opt-out or suspend participation.
Employees will have a range of four retirement savings strategies to choose from.
Three strategies will have differing risk/return profiles. In addition, a default strategy based on what is known as a ‘life-style’/’life-cycle’ investment profile will be provided.
People who do not express a preference for any strategy will be enrolled into the default strategy.

4) Simplicity

Administrative costs and burdens are to be kept to an absolute minimum for both employers and employees through the establishment of ‘NAERSA’ to administer the system.
Employers will not have to invest in the establishment or procurement of an occupational scheme for their own business. They will simply be required to facilitate payroll deductions.
Importantly, people moving between jobs will not have to change pension schemes or join a new scheme. They will remain members of the Auto Enrolment scheme on a ‘pot-follows the member’ basis. In addition, people with multiple employments will have their pension savings consolidated into one AE ‘pension pot’.
Services will be provided and supported through an easy-to-use online channel where participants will see their savings pots grow quickly and substantively.