Employers are subverting the incoming workplace pension scheme and forcing their staff to sign up to inferior in-house arrangements simply to reduce their administrative workload, the Government has said.
Minister for Social Protection, Dara Calleary, is now looking to rush through legislation to close a perceived loophole and ensure that any occupational pension scheme offers workers at least as good a pension arrangement as the My Future Fund auto-enrolment scheme coming into force in January.
In an extraordinary intervention, the secretary general of Mr Calleary’s department, John McKeon, warned employers that it is an offence to “hinder or attempt to hinder an employee from participating in the My Future Fund scheme”.
Compelling staff to join an in-house scheme without their explicit consent may also leave companies exposed to action for breaches of data protection legislation, he said.
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In a letter to Irish Congress of Trade Unions general secretary Owen Reidy, Mr McKeon said the Department understood that “payments into these pension schemes consist solely of an employer contribution of about 1 per cent of salary... It is essentially a nominal contribution that is unlikely to yield any material pension benefit.”
Under auto-enrolment, employers will be obliged initially to contribute 1.5 per cent of a worker’s gross salary to the My Future Fund, a figure matched by the employee, with the State adding €1 for every €3 contributed by the worker.
That figure will rise every three years until workers and their employers are putting 6 per cent of gross salary each into the scheme by 2035.
All workers earning more than €20,000 from one or more jobs who are aged between 23 and 60 and who are not yet members of an occupational scheme will be enrolled in the new arrangement from January.
Mr McKeon said the pensions regulator and the National Automatic Enrolment Retirement Savings Authority (Naersa), which is overseeing the new mandatory workplace pension scheme, are considering putting in place new rules requiring minimum contribution rates to any occupational pension scheme.
“As required under the Act, such standards shall aim to ensure that the terms that qualify a pension scheme as exempt are at least as favourable to employees as those available through the My Future Fund scheme,” Mr McKeon wrote.
Mr Reidy welcomed the determination of the Minister to preserve the integrity of the new State-run pension scheme.
“Setting minimum employer contributions for determining whether an employee will be auto-enrolled has become an urgent and necessary move to protect the integrity of auto-enrolment and spare another generation of workers from seeing their income and living standards plummet in retirement,” he said.
“New regulations will mean a token employer pension contribution will no longer satisfy the requirements of the Act, cutting off this avenue for those employers looking to violate the spirit of the law.”
