The ongoing delays to the State auto-enrolment pension scheme have led to concerns it will never see the light of day – but what will it mean for Irish workers.
Auto-enrolment would see workers automatically signed up to a pension scheme when they begin a job.
The employer would match their monthly contributions, with both worker and employer eventually paying 6% of salary into the fund. The State would also top up the worker’s contribution by 2%.
A 2023 deadline to get the scheme up and running has been shelved due to the COVID pandemic with 2024 now a more likely target.
Similar schemes are already in place in many developed countries and the scheme is seen as a way to address the looming pensions crisis.
Currently around 45% of workers do not have a supplementary pension of any kind – a figure that rises to 65% in the private sector.
In a special report for The Hard Shoulder this evening, Newstalk reporter Paul O’Donoghue spoke to workers at all stages of their careers to see how prepared they are for retirement.
Marian, a 58-year-old childcare centre manager in County Kerry said she expects to work at least ten more years before she has saved enough to retire.
“Every month, money is taken from my salary and goes into my PRSA before I receive the rest of my wages,” she said. “There is no input from the employer. It is just whatever I can save myself.
“I am serving out my notice as we speak. I am in my last month of employment after 20 years. If I had 20 years of pension contributions under my belt I might not be looking so actively for employment in another sector.”
She said many of her contemporaries in the education sector are now close to retirement, with public service pensions to fall back on.
“I don’t have the option of retiring any time soon because of the last 20 years I have paid a pittance into a personal savings account,” she said.
“I haven’t paid anything effective into a pension account so, even though I am 58 and I have contemporaries in other areas - particularly other areas of education, you know they are in primary and secondary and they are looking towards retirement - I know I have got to put in at least 10 years of employment somewhere else to build up enough pensions contributions to retire.
“It’s a huge issue.”
The Irish Association of Pension funds CEO Jerry Moriarty said auto-enrolment will benefit both employees and businesses in the long run.
He said businesses will face increased labour costs but that will be cushioned by the fact that the contributions are phased in over ten years, starting at 1.5% and doubling every three years until they reach 6% at the ten-year mark.
“It is going to increase their costs. It is going to increase labour costs. I think that is mitigated in some ways in that the contributions, the proposal is they get phased in over ten years. It starts of at 1.5% salary of goes up 1.5% every three years and eventually gets to 6% after year 10.
“Ultimately I think the argument is that this is for the greater good,” he said. “It is for the long-term good.
“The ESRI have also looked at the economic impact and they have said that yes, there will be less economic impact in the short-term but it is positive in the long term because what you are doing is smoothing out people’s consumption over their lifetime and ensuring a lot of people don’t get to retirement and have very little spend because they have saved nothing for their retirement.”