The current Minister for Social Protection, Leo Varadkar, has, on a number of occasions, mentioned his desire to introduce auto enrolment in Ireland.
This will be a welcome and necessary development as it is unlikely that the current levels of state pension will be sustainable in the medium to long term.
The UK is nearing the end of its auto enrolment roll out and there are, I believe, a number of lessons learnt.
On the face of it, the requirement to enrol an employee into a pension scheme (based on age and earnings), to make deductions/contributions and to allow for opting out, would all appear very straightforward. Not so! Employer guidance extends to many hundreds of pages and the rules are unnecessarily complex.
My first suggestion is to keep it simple. If the minister has his way, auto enrolment may commence around about the same time as Revenue’s Smart PAYE project. This will be a lot to take on board at the one time, particularly if the UK’s auto enrolment rules are anything to go by. Examples of how to make it simpler - link everything to pay date (not pay period) and forego the requirement to apportion.
Next, I would suggest that a common filing standard is adopted at the outset for both enrolments and contributions. This was attempted in the UK, without success. The main problem was the pension companies and their differing systems. Ideally an all encompassing file specification would be mandated and the pension companies would just have to accept. Plus there would need to be common business rules for the various fields in the specification. Lessons learnt here from the SEPA roll out which resulted in similar looking files for the various banks but with very different business rules!
Postponement is a handy feature in the UK system but it does complicate things further. If everything else can be made simple and seamless, then postponement may not be required. Hand in hand with this would be the suggestion that all employees are enrolled no matter what their earnings are and no matter how temporary their employments are for. They would still have the ability to opt out.
Also, the creation of a government backed master trust (similar to NEST in the UK) would further obviate the need for postponement as postponement is generally used to get a pension scheme set up.
In relation to opting out, the opt out window should be linked to the actual pay date of first deduction rather than the auto enrolment date (which itself has many potential definitions) or scheme join date.
Employee communications is another big part of the whole process. The UK communications have evolved and simplified over the last few years and their present format would be fine for Ireland.
Finally, the actual calculation of the pension deduction/contribution should be based on all (taxable) earnings. The UK rules limit the calculation to a portion of the earnings, further increasing its complexity.
The above are my main suggestions and stem from our involvement with the UK system through our UK payroll software, BrightPay, where we have ongoing engagement with employers, accountants, professional bodies, HMRC, the Pensions Regulator, NEST, IFAs and the various pension providers.
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