Employers’ group Ibec is calling for changes to planned legislation that will put mandatory workplace pensions in place.
Contribution levels to the proposed auto-enrolment pension scheme should be looked at again, with competitiveness and affordability reviews completed before contributions are increased from their entry level, Ibec executive Fergal O’Brien will tell an Oireachtas committee on Wednesday.
The scheme foresees employers and workers each putting 1.5 per cent of the employee’s gross salary into the scheme at the outset, with the figure rising to 3 per cent, 4.5 per cent and finally 6 per cent after the scheme has been operating for four, seven and 10 years.
“We are concerned about the scale of contributions required for both employees and employers,” Mr O’Brien, Ibec’s executive director of lobbying and influence will say in his opening address to the committee. “Contribution costs will present a significant affordability challenge for many workers, particularly as they continue to struggle with cost-of-living challenges while 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.”
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The Oireachtas Joint Committee on Social Protection, Community and Rural Development and the Islands is examining draft proposals for a scheme that will automatically enrol workers between the ages of 23 and 60 earning more than €20,0000 a year into a workplace pension scheme. The Government has committed to have the scheme up and running by early 2024 though Department of Finance officials have now cast doubts on whether that timeline is achievable.
Mr O’Brien will also call for the auto-enrolment of self-employed people, who Ibec says make up 16 per cent of the working population, in the pension scheme on the basis that only about 30 per cent of this group had personal pension cover.
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But it objects to the current €80,000 salary cap on which employers and workers will have to pay contributions, claiming it is too high and the scheme “should be more focused on building contributions for entry-level, low-cost savings”.
He will say that Ibec is “particularly concerned” at the plan to automatically re-enrol workers who opt out of the scheme after two years, rather than three as originally proposed, arguing that it would impose “an excessive administrative burden on employers” and suggesting that the lack of a waiting period before enrolment could undermine existing occupational pension schemes.
Despite Ibec’s reservations, it remains a “strong advocate for automatic enrolment”, he will say, with pension coverage outside the State pension “stubbornly low, despite policy announcements by successive governments over the last 20 years”.
Failure to introduce a scheme to broaden occupation pension coverage will “risk doing serious damage to our consumer economy leaving a generation with substandard pensions coverage and an unsustainable bill for the State”, the employer’s group will tell the committee.
