Hundreds of thousands of low and middle-income earners set to be automatically enrolled in a new Government pension plan will have to pay hundreds of euros in management fees to opt out of the scheme.
Social Protection Minister Regina Doherty revealed the draft plans yesterday in a bid to avoid widespread poverty among a new generation of pensioners if nothing is done to address Ireland’s dwindling pensions pot.
Under a new initiative put out for public consultation until November, the Government has called for a new compulsory employer contribution scheme to be introduced within four years.
The scheme will focus specifically on 410,000 workers on low or middle incomes who are paid more than €20,000 a year and are aged between 23 and 60, with the self-employed or those paid less than €20,000 a year also allowed to opt in.
The plans will also mean that workers will be asked to pay 1% of their salary into a pension fund by 2020, with employers legally obliged to match the rate, which will increase to 6% by 2028.
The long-delayed move — first suggested in the mid-1990s — has been welcomed by business and union groups as a potentially key step in addressing Ireland’s pensions time-bomb.
Delivering on a commitment made in the Government’s Roadmap for Pensions Reform 2018-2023, Minister Regina Doherty today launched a public consultation process and a Strawman proposal for a new ‘Automatic Enrolment’ Retirement Savings System in Ireland pic.twitter.com/BEHHoCavkx— MerrionStreet.ie #StaySafe #HoldFirm (@merrionstreet) August 22, 2018
However, concerns have been raised over the fact anyone still wishing to opt out of the scheme despite the risk of having no pension will have to pay a small management fee of 0.5% as they will not be able to leave for six months — a fee that will be charged more than once as an individual will be automatically enrolled every three years.
And, while department officials sought to downplay the significance of the “minuscule” sum, saying it is far more “competitive” than other existing pension management fees, the fact is the charge could see someone on the industrial wage facing hundreds of euro in extra costs.
Speaking at Government Buildings yesterday, Ms Doherty said international figures show 90% of people choose to remain in mandatory pensions schemes.
She added that the new system will be in addition to the State pension, which she stressed remains “the bedrock of the financial system in the pensions area”.
The Irish Congress of Trade Unions said “the devil is in the detail” for the plans, which can be viewed at www.welfare.ie and will remain up for public consultation until November, while Brokers Ireland welcomed the move.
Anyone wishing to submit their pensions plan views can do so by e-mailing firstname.lastname@example.org.