Small Firms Association lobbied for delay to auto-enrolment pension scheme

SFA's letter to the Oireachtas social protection committee was released to the 'Irish Examiner' through an FOI request

SFA public affairs lead Elizabeth Bowen warned that small firms are not prepared for the scheme being legislated for in the Automatic Enrolment Retirement Savings System Bill. File picture: Ibec.ie

The Small Firms Association (SFA) lobbied politicians to delay the rollout of the pension auto-enrolment scheme, potentially until 2026.

They cited “multiple challenges within the business environment”.

The Automatic Enrolment Retirement Savings System Bill 2022 was approved by the Government in October last year. The expectation was that the scheme would be up and running by 2024.

Some 750,000 workers between the ages of 23 and 60 and earning over €20,000 a year would be automatically enrolled in a private pension scheme, through a new agency called the Central Processing Authority.

Employers would be obligated to match their employees’ contributions — which would increase incrementally over 10 years — with the State adding €1 for every €3 put in by employees.

Under the scheme, 750,000 workers aged between 23 and 60 would be enrolled into a private pension. 

However, the SFA has raised concerns that many of their members will find it challenging to meet their obligations.

In a letter to the chair of the Oireachtas social protection committee, Denis Naughten, as well as to the Social Protection Minister Heather Humphreys, the SFA said small businesses “are not budgeting” for the scheme, “due to the uncertainty around its introduction”.

The letter was released to the Irish Examiner through a Freedom of Information request.

The letter, written by Elizabeth Bowen, the public affairs lead for the SFA, said that small businesses are facing “multiple challenges within the business environment”, including the increasing cost of doing business, labour shortages, and the commencement of statutory sick leave, among other issues. These are “layering costs on employers, but they are not coming about in a coordinated way”.

“To see a successful introduction of auto-enrollment, we must give certainty to business owners about introduction dates and administration.  By doing this, you allow our smallest employers to understand the impact of this change on labour costs and plan for it.

“Therefore, we are asking this committee to support Ireland’s small-business community and push the implementation to 2025, at the earliest, and possibly 2026, so that business owners can have enough lead-in time to implement this change, alongside other employment legislative changes,” Ms Bowen wrote.

The SFA also raised a number of issues with the proposed legislation, including the “scale of contributions” and that the contribution costs “will present a significant affordability challenge for many workers”.

Employers have faced a raft of state and market-related labour-cost increases in recent years, and this will add further to competitiveness risks facing Irish business.

The SFA said that the upper salary threshold of €80,000 is “too high”, as the scheme should be more focused on entry-level savings. It also called for competitiveness and affordability reviews.

Ms Bowen added that the SFA “remains supportive” of the bill, but asked the social protection committee to “carefully consider these changes” as it develops its pre-legislative report.