Employers’ group Ibec has called on the Government to delay the introduction of a mandatory workplace pension until after the next election. Speaking to an Oireachtas committee, Ibec director of lobbying and influence, Fergal O’Brien, said there should be a full two-year lead-in period to the introduction of workplace auto-enrolment from the time the legislation is complete and has been signed into law.
Auto-enrolment will see everyone earning over €20,000 a year and aged between 23 and 60 enrolled in a private pension scheme. Up to 750,000 workers are likely to be affected initially when the scheme gets up and running.
The Minister for Social Protection, Heather Humphreys, expects the legislation to be in place by the end of this year, meaning that on Ibec’s timeline the scheme would not start taking contributions from workers and employers until the start of 2026. With an election due in 2025, there will be a new and potentially very different government in power by that stage.
Mr O’Brien stressed that Ibec was strongly in favour of auto-enrolment with a focus on targeting low- to middle-income earners.
“Our main ask is to say first of all that employers are very well disposed to make employer contributions but we need to give them certainty about their long-term labour costs,” he told the Oireachtas Joint Committee on Social Protection, Community and Rural Development, and the Islands on Wednesday.
He said businesses would be drawing up 2024 budgets within the next three to four months, and that uncertainty about labour costs after that could force them into “knee-jerk responses” potentially impacting on employment. “If we went out today and asked our members are they budgeting for an AE [auto-enrolment] contribution in 2024, they’d tell us ‘no’ because they don’t have a commencement date,” he said.
He added that previous experience suggested the setting up of a central processing authority (CAP) at the heart of the auto-enrolment process to handle the collection of contributions, the allocation of investment and the pooling of returns for members will prove more difficult than envisaged by the Government.
“We do observe the particular challenges around the CPA proposal,” Mr O’Brien said. “It seems to us that that will be a very complex organisation, technology and administration system that will need to be established. Everything we know from public policy and the establishment of similar agencies in the past would suggest that that will take some time, will be complicated and will have teething problems.”
He said employers considered it would make more sense to organise contributions through the Revenue Commissioners who already have close links with all employers and systems in place to arrange deduction of taxes.
Mr O’Brien also said that ramping up contributions by employers and workers from zero to 6 per cent over a decade represented a significant increase in labour costs, especially alongside other measures recently introduced, such as an enhanced statutory sick pay regime. He said the view of Ibec was that the contributions being sought from employers and employees were on the high side.
Committee acting chairman Marc Ó Cathasaigh took issue with Ibec’s objection to making pension contributions under auto-enrolment on salaries up to €80,000. The Green Party TD said that it was unlikely to be an issue as couples earning more than €49,000 and therefore paying tax at the higher 40 per cent rate were more likely to migrate to a more traditional occupation pension or similar arrangement which would offer them better tax relief and terms and conditions.
The €1 for every €3 of employee contribution under auto-enrolment was, he said, essentially tax relief at 25 per cent. Those paying tax at the higher rate could get 40 per cent relief on contributions into a normal occupational pension scheme but not into an auto-enrolled pension.