Select Committee on Social Protection, Community and Rural Development and the Islands díospóireacht -
Wednesday, 8 May 2024

Automatic Enrolment Retirement Savings System Bill 2024: Committee Stage

An Cathaoirleach

Apologies have been received from Deputy Joe Carey, and I believe Deputy Paul Kehoe is substituting for him. Members participating in the meeting remotely are required to do so from within the Leinster House precincts only. I remind all in attendance to make sure their mobile phones are switched off or on silent mode. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person or entity outside the Houses or an official either by name or in such a way as to make him or her identifiable.

The purpose of this meeting is to consider the Automatic Enrolment Retirement Savings System Bill 2024. I welcome the Minister for Social Protection, Deputy Heather Humphreys, and her officials to the meeting.

I wish to bring some matters to the attention of members. Any member acting in substitution for a member of the committee should formally notify the clerk to the committee if she or he has not done so. Divisions will take place as they arise. Members must attend in person in the committee meeting room for all divisions although they may attend the meeting generally remotely. Members attending this meeting in accordance with Standing Order 106(3) should be aware that pursuant to that Standing Order, they may move amendments but cannot participate in voting on those amendments.

I invite the Minister, Deputy Humphreys, to make her opening statement.

Minister for Social Protection (Deputy Heather Humphreys)

I thank members for attending today and for facilitating the early hearing of Committee Stage of the Bill.

The implementation of the automatic enrolment, AE, retirement savings system represents probably the single biggest reform of the pension system in the history of the State. I reiterate the Government’s commitment to the State pension remaining the bedrock upon which the Irish pension system is founded. I want to make it clear that auto-enrolment is not being set up to replace the State pension or undermine it in any way. AE will be an additional source of income in retirement on top of the State pension. This is a key message that I will continue to emphasise as we implement the new system.

AE is needed because both pension coverage and pension adequacy, particularly in the private sector, is too low. This is despite the significant financial incentives offered by the State that exist in the form of tax relief on pension contributions. For me as Minister, continuing with a situation whereby approximately two thirds of private sector workers may be totally reliant on the State pension for their income when they retire is not acceptable.

When enacted, the legislation will pave the way for approximately 800,000 workers to be brought into a retirement savings scheme for the first time. As I outlined in my Second Stage contributions, the Bill will provide for a new, highly-automated, high-quality retirement savings system that will automatically enrol workers based on payroll data.

The Bill also provides for the establishment of a new State body, namely, the national automatic enrolment retirement savings authority, NAERSA, to administer the scheme and act as a buffer between participants and the financial investment companies that will be tasked with growing their savings. The authority will act in the best interests of participants at all times. It will collect contributions, arrange for the investment of contributions, manage participant accounts that will be accessible through an online portal and facilitate the payment of savings at retirement.

The legislation provides for the automatic enrolment of employees aged between 23 and 60 who earn more than €20,000 per year across all employments and who are not already paying into a pension scheme in respect of some or all of those employments. To encourage workers to maintain participation, workers will have their retirement savings matched on a one-for-one basis by the employer. In addition, the State will provide a top-up of €1 for every €3 saved by the worker. All in all, for every €3 saved by the employee, a further €4 will be contributed by the employer and the State combined, resulting in a total saving of €7.

Participants will be allowed to opt out or suspend their contributions after a mandatory six-month participation period. That mandatory period is very important because it will allow workers to see their savings pots increase very quickly in that short time with the matching contributions from their employer or employers and the State top-up. When they see that, I believe it will be clear to them that this is a good thing and they will want to stay in. However, where somebody does opt out for whatever reason, they will receive a full refund of their personal contributions. They will then be re-enrolled again after two years. Participants’ money will be invested in line with an age-based default strategy that will benefit from compounding growth in the early years of the investment lifecycle while reducing risk as the individual participant nears retirement.

As I have said previously, long life is a blessing, not a burden. Implementation of AE will help workers maintain a good standard of living after their long years of working in paid employment.

At this stage, I wish to inform members of the committee of my intention to bring a number of amendments to the Bill on Report Stage. The Office of the Parliamentary Counsel is currently drafting these in an appropriate manner. These are mainly of a technical nature to ensure that this digitised and automated system operates as intended in the agreed design. As these amendments could not be ready in time for Committee Stage, I will introduce them on Report Stage. These amendments are as follows: a number of typos and technical amendments the drafters are looking at fixing. Following on from observations on the published Bill from colleagues in the Department of Finance, I wish to include "pan-European personal pension products’", or "PEPPs", as being among the existing pension products that are relevant to sections in the Bill dealing with exempt employment, the standards to be developed for the purposes of section 51 and the determinations subject to internal review.

With regard to provisions on the suspension of contributions and notification and verification of death, I wish to ensure the procedures should be specified and published by the authority as operational matters, rather than prescribed by regulation.

Where reference is made to a person's "correspondence address", I wish to add in a qualification that this is relevant only where that address is known or is available to the authority. With regard to regulations for the purposes of communications and services, I wish to ensure the whole Act and not just that part of the Act is taken into account.

Finally, I want to ensure that any potential gap in data that is to be provided by the Revenue Commissioners to the new authority with regard to the payment of contributions by employers to NAERSA or the payment of contributions by workers and employers into existing pension schemes is plugged. This is an operational matter that is being considered at the moment by my Department and the Revenue Commissioners. In short, I expect to propose amendments that will allow for the transfer of payroll data from employers to the new authority to ensure that a reconciliation exercise can be undertaken; and from employees to the authority in respect of their joining another pension scheme. I am told that two minor technical amendments will bridge this potential operational gap.

Once again, I thank the committee for facilitating the hearing and debating of the Bill today. I look forward to our discussions.

Sections 1 to 10 agreed to.

SECTION 11

An Cathaoirleach

Amendments Nos. 1 and 2 are related and may be discussed together, by agreement. Is that agreed? Agreed.

Deputy Sean Sherlock

I move amendment No. 1:

In page 15, to delete lines 4 and 5 and substitute the following:“(a)a person nominated by the Irish Congress of Trade Unions, and”.

We welcome the Minister accepting the Oireachtas committee's recommendation in its pre-legislative scrutiny report to have employee and employer representatives on the board. That was recommendation 8. The absence of a workers' representative on the board in the draft heads of the Bill had been raised by ICTU in its evidence to the committee as something that needed amending. The Labour Party amendments seek only to ensure that the provision for the appointment by the Minister of a board member who has knowledge of or experience in matters relating to the interests of employees is in line with the provisions in existing legislation. There is a recent example of that in the Regulation of Providers of Building Works and Miscellaneous Provisions Act 2022, whereby of the persons appointed to be board members - I quote from the Act – "1 shall be nominated by the Irish Congress of Trade Unions,". That is in section 22.

ICTU, as the representative body of trade unions and workers, must be asked to nominate its representative to the board of the authority and while this may be the Minister's intention, it needs to be written into the legislation to protect against future governments which may have other less honourable intentions.

Deputy Donnchadh Ó Laoghaire

I fully support Deputy Sherlock's amendment. In the past, predecessors of the Pensions Board would have had representatives of workers, and that is vitally important. It is not exactly a new departure. Deputy Sherlock has identified existing legislation where it occurs and I think several pieces of legislation specify that the Irish Congress of Trade Unions would be an appropriate nominating body. When we talk about the interests of workers, it is the trade union movement that is most appropriate to represent them. I question the fluffy wording in the legislation. Like Deputy Sherlock, I accept the Minister's bona fides but I have no idea why we would include something so fluffy and imprecise when we could put in something that is very clear and precise. The Irish Congress of Trade Unions is clearly the appropriate nominating body. It should be as simple as that.

Deputy Heather Humphreys

I thank the Deputies for their comments. I do not propose to accept these amendments because section 11 already sets out that the board of NAERSA will contain a person who has knowledge of or experience in matters relating to the interests of employees. This person could well turn out to be a representative of ICTU, or someone who would otherwise meet the approval of trade unionists.

When appointing people to the board I must ensure that, collectively, it has the necessary experience relating to the functions and the responsibilities of the authority. Membership of the board is therefore not constituted on the basis of sectoral representation but instead on what that person has to offer to the authority.

Deputies should note that I have not specified an employer representative group either. This is appropriate because section 11 provides that: "The duties imposed on members of the Board in the performance of their function sunder this Act shall be owed by them to the Authority and the Authority alone." Therefore, their first loyalty is to the board.

Moreover, ICTU is not necessarily representative of all automatic enrolment participants. The unfortunate fact is that very many of the AE participants will not be members of any trade union. Workers who enjoy trade union representation tend also to enjoy good pension provisions, so they would not be picked up by AE in the first place. In short, I do not propose to accept these amendments. With due respect to ICTU and to trade unions generally, I think the proposed amendments are too limiting and are not in line with the purpose of that section of the Bill.

Deputy Sean Sherlock

I note the Minister's comments. While it may be the case that many workers are not members of trade unions - there are very many low paid workers, for instance, who may not be members of trade unions in private sector employment - but as far as I am aware, they are not represented by any known body. It is fair to say that although they may not be members of trade unions, I contend respectfully that the recognised umbrella body that would have regard to their rights and entitlements could be none other than ICTU.

On the basis of the Minister's non acceptance of the amendments, I propose to withdraw them, with a view to asking her and her officials if she might have further thoughts on this matter. I will not press the amendments but I reserve the right to bring them forward on Report Stage.

Deputy Donnchadh Ó Laoghaire

We are in danger of overly complicating matters. To some extent, this is a break with previous practice. In the Minister's opinion, board members must have knowledge and experience of matters relating to the interests of employees. That could be an employment lawyer who has occasionally represented workers but spent most of their life representing employers. That is a legitimate pursuit, but it would not necessarily be correct to suggest they would be a representative of workers' interests.

I do not accept the Minister's point about a board member having to act in the interests of the board. That is the case with any State board. Board members have fiduciary duties. That is the case for nominees to any board whether they are nominated by ICTU or the National Women's Council. Those organisations are in a position to nominate or propose people to be considered as board members but once a nominee goes onto a board, he or she has a fiduciary duty and responsibility to the company or organisation. That is not new. That has always been the way, and rightly so. It is not the case that they should be reporting back to ICTU about the positions they take. Once someone goes onto a board, his or her responsibility is to the board. The objective here is to ensure that somebody is appointed who has a very strong level of experience, understanding or perspective of the workers' movement and of workers' interests. Given the role the Irish Congress of Trade Unions has enjoyed in legislation, in social partnership and all the rest of it, this is a break with previous practice.

That we might find a representative of workers' interests other than the Irish Congress of Trade Unions is a new departure, a break from previous practice. The reasons I have been given are not at all compelling. We are over-complicating something that should be very straightforward. This committee recommended that there be a voice that reflects the experience of those representing workers' rights. The Minister said she is accepts this but we have a very fluffy section instead of just allowing the Irish Congress of Trade Unions to nominate somebody and be done with it.

Deputy Heather Humphreys

The role of the board of NAERSA is to look after the interests of the automatic enrolment participants. It will obviously take account of the employers and workers. The Minister who appoints the board will ensure one of the representatives has strong experience regarding the workers. I do not want to be prescriptive in that ICTU is the nominating body. It is up to the Minister to examine all the skill sets put forward. It is very important when choosing a board to set out clearly the various criteria needed because everybody brings a different skill set. I will ensure the interests of employers and workers are included on the board. That is what the legislation proposes and why I cannot accept the amendment.

Amendment, by leave, withdrawn.

Amendment No. 2 not moved.

Section 11 agreed to.

Sections 12 to 39, inclusive, agreed to.

SECTION 40

An Cathaoirleach

Amendments Nos. 3 and 4 are related and may be discussed together.

Deputy Sean Sherlock

I move amendment No. 3:

In page 34, between lines 23 and 24, to insert the following:

"(d) a review of the performance of occupational pension coverage from current employment,".

While unions strongly support the move to automatic enrolment, recognising that the current voluntary approach to pension savings has failed, they are concerned that automatic enrolment risks displacing existing workplace pensions. In other words, employers could now automatically enrol new hires, because it would be perceived to be cheaper, resulting in the phasing out of an existing occupational pension scheme over time. As I understand it, the Bill obliges the authority to prepare an annual report for publication that must include a review of the performance of the automatic enrolment provider schemes over the five preceding years, the ten preceding years and any other periods of such duration as may be determined by the board. The purpose of our amendment is to require the annual report to include a review of the performance of occupational pension coverage from current employment. The Bill makes provision for an annual report and statistical data related to the performance of the automatic enrolment retirement savings system to be produced and to be transparent and publicly available. We welcome that, obviously, but the purpose of our amendment is to extend the review to include a review of the performance of occupational pension coverage from current employment. Automatic enrolment is intended to operate alongside existing occupational pension schemes, not in place of them, where they meet minimum contribution standards. Having information on the performance of occupational pension coverage from current employment published alongside data relating to participation in the automatic enrolment retirement savings system will allow for the early detection of unintended consequences regarding the displacement and dilution of current good workplace pensions and for remedial action to be taken in real time. Data on occupational pension coverage are already collected and published by the CSO annually, as we know. The amendment simply seeks to improve transparency regarding the performance of the automatic enrolment retirement savings system.

Deputy Marc Ó Cathasaigh

Even though these two amendments are grouped, they are quite different in nature, so we are discussing apples and oranges.

This is really welcome legislation, as was said on Second Stage, and it represents good policy and politics. If the scheme were up and running next year, it would be 2065 before those who had worked for 40 years would exit and benefit from it. I do not believe they will be voting for Deputy Ó Cathasaigh or the Minister, Deputy Humphreys. Deputy Humphreys might still be in politics in 2065 but I suspect I will not. There will not be a great number of votes won or lost on the basis of this committee meeting, but the Department, the Minister and her officials deserve great praise for driving this legislation forward. It is very important because it is so far-reaching. Broadly speaking, all my amendments are predicated on the idea that there are certain places in which a state should not invest its money. A state should not invest its money in munitions, nor should it invest in fossil fuels. If in 2065 we are still in the business of fossil fuels, I do not know the value of the future we are preparing for. Similarly, if we live in a future in which investment in cluster munitions and the like is profitable and, for that reason, we sign off on it without taking cognisance of our moral responsibility, it will reflect poorly on us.

The amendment is about the production of statistical data. Currently, the provision states "the Authority shall publish on its website aggregate statistical data relating to participation in the automatic enrolment retirement savings system and the level of retirement savings in the State and such other statistical information as may be prescribed". I want to add the types of funds invested in. By doing so, we would be saying that while the authority must report on the amount of retirement savings in the State, it should also be required to publish data on where the money is invested. This does not get into the argument as to whether it is right or wrong to invest in fossil fuels, munitions or otherwise, but we should be able to see where the money invested on behalf of the people, with some input from the State coffers, is invested. It should be clear to people, and the new pensions body should be required to report on it.

Deputy Heather Humphreys

There is no evidence of displacement. The evidence in the UK is that employers have improved schemes and membership has increased since the introduction of automatic enrolment rather than decreased, which is good. We want to see more pension coverage.

Amendment No. 3 relates to occupational pensions. They do not come within the scope of this Bill or the functions of the authority, NAERSA, and it would not be appropriate to add the proposed function to those of the authority.

The section which amendment No. 3 seeks to amend concerns the annual report of the authority and covers an overview of its activities and complaints, reviews and appeals. It also provides for the periodic review of the performance of investment funds. These are all appropriate to the authority. However, with regard to occupational pension schemes, there is already a State body charged with overseeing the operation of and coverage provided by them. That, of course, is the Pensions Authority. Part of the statutory duty of the Pensions Authority under the Pensions Act is to monitor and supervise the operation of that Act and pension developments generally, to carry out prudential supervision of pension schemes, and to ensure the stability and soundness of those schemes. Therefore, I intend to leave that function with the Pensions Authority and not to overburden the auto-enrolment authority with doing this. For that reason, I do not propose to accept these amendments. At the minute, with the way NAERSA is constituted, it will not have the powers to get the information on all the occupational schemes. That is not in its remit per se.

I do not propose to accept amendment No. 4. I believe it is already provided for. Statistical reporting in respect of investment funds is provided for in section 40(3) of the Bill. This includes periodic reporting on the performance of these funds and any other matters that are considered to be appropriate to report on.

Deputy Sean Sherlock

If I understand the Minister correctly, when she states that there is no evidence of displacement, one cannot measure that in an Irish context just yet and I think she is speaking to a UK context. Is that correct? I just want to be clear on that.

Deputy Heather Humphreys

Yes.

Deputy Sean Sherlock

I thank the Minister. I take and appreciate that point. I think what we are talking about here is good data and good transparency. We were mindful when putting forward the amendment that we would not seek to step into other terrain where no such mandate exists to do so. What we are talking about here is the collation of data with a view to ensuring that the risk of displacement is at least measured. It is more about data collection than anything else. I accept that the Minister is not accepting the amendment. I will withdraw it with a view to perhaps resubmitting it on Report Stage.

Deputy Marc Ó Cathasaigh

When the Minister referred to section 40(3)-----

Deputy Heather Humphreys

Sorry, I referred to section 40(3).

Deputy Marc Ó Cathasaigh

In paragraph (b)(i) of that subsection-----

Deputy Heather Humphreys

Statistical reporting is already provided for. It includes periodic reporting on the performance of these funds and any other matters that are considered to be appropriate to report on.

Deputy Marc Ó Cathasaigh

Similarly, section 42 refers to "other statistical information as may be prescribed." There is a strong argument for having the authority report on the type of funds. I know it is within the powers of the Minister under the legislation to ask for that. The legislation would be stronger if we expressly stated we would like to see where the money is and made that one of the reporting obligations, so it will not be the decision of any individual Minister at any point of time, but would be within the primary legislation. That would be stronger and would set out the language much more clearly.

Deputy Donnchadh Ó Laoghaire

I support both amendments but I am primarily speaking to Deputy Ó Cathasaigh's amendment. It is very rational and logical. While I disagree with a fundamental element of who is responsible for the investment, auto-enrolment is crucial in the long term. We need to consider the types of investment that are made, both for those beneficiaries in the industry but also the wider social context. It is right to make the words "having regard to" stronger. It occurs to me that it might put a Minister in a better position in the future if a story breaks that it turns out the auto-enrolment board has invested a certain amount into cobalt mining or whatever and, if it was not for this amendment, the Minister of the day could say we do not have data on that or, at least, that we have not been in a position to consider that, whereas with Deputy Ó Cathasaigh's amendment, the Minister would be in a better position, because he or she might have more oversight and there might be a more formal process for the oversight and consideration of such considerations as climate change and the environment.

Deputy Heather Humphreys

Regarding amendment No. 4, I can ask the Office of the Parliamentary Counsel, OPC, to look at it. I have no problem doing that. I do not know if it is going to make a huge difference, but I am happy to get the OPC to look at it to see if it would be okay to put in the types of funds invested in. Is that okay?

Deputy Marc Ó Cathasaigh

I would be more than happy to withdraw the amendment on that basis.

Amendment, by leave, withdrawn.

Section 40 agreed to.

Section 41 agreed to.

SECTION 42

Deputy Marc Ó Cathasaigh

I move amendment No. 4:

In page 35, lines 4 and 5, to delete “and the level of retirement savings in the State” and substitute “, the level of retirement savings in the State, the types of funds invested in”.

Amendment, by leave, withdrawn.

Section 42 agreed to.

Sections 43 to 51, inclusive, agreed to.

SECTION 52

Deputy Sean Sherlock

I move amendment No. 5:

In page 42, line 22, to delete “years 7 to 9” and substitute “years 4 to 6”.

The Labour Party acknowledges that the authority will need time to draw up and apply standards to occupational and private pension contributions because it is not as simple as comparing like with like. For example, auto-enrolment contributions would be deducted from after-tax earnings, while private pension contributions are deducted from pre-tax income. We agree with the Minister that there can be no further delay in getting auto-enrolment up and running for the 800,000 eligible unpensioned employees. We absolutely agree that the time for talking is over. The general secretary of the Irish Congress of Trade Unions, Owen Reidy, pointed out the following in a press statement ahead of the Second Stage debate:

It will be a bitter pill to swallow for workers who find themselves with a lower or, in cases of personal pensions, no employer contribution all because they had proactively taken steps to save for their retirement prior to auto-enrolment. More ambition and an amendment are needed.

That is what the Labour Party amendment is calling for - more ambition. The deadline to draw up and apply standards to levels of employer and employee pension contributions should be reduced from the beginning of years 7 to 9 to the beginning of years 4 to 6. CSO figures on pension coverage shows that one in 20, or 5%, of employees with a pension have a PRSA only. Under this section of the Bill, these workers will not be automatically enrolled or guaranteed a minimum employer contribution to their retirement savings account for up to seven years after auto-enrolment comes into operation. If they are on average earnings, which is approximately €952 gross per week, they will miss out on an employer contribution of up to €6,500. We have kicked the tyres on that.

Reducing the deadline to the beginning of years 4 to 6 gives the authority the time it needs to draw and apply the standards for exempt employment under the Act while drastically cutting the losses for retirement savings workers with no, or a low employer contribution, going into their pension pot. That is two thirds, give or take. A back-of-the-envelope calculation on that is €2,150 over years 1 to 3. That is what that amendment is about.

Deputy Heather Humphreys

If a person has a PRSA and it is not deducted through payroll, he or she is automatically put into the AE system, because this is a payroll deduction. AE comes from payroll deduction. We feel that the wording of this section is important. It states that the first standard would be drawn up from a date no later than "the beginning of years 7 to 9." That means that the standard for employments to be exempt from AE are to be drawn up by the end of year 6 at the latest. The reason we are leaving it until that time is that we see some of the contributions increase. Initially, we start off with 1.5%. It increases gradually up to a maximum of 6% in year 10. We want to see the changes that brings in. In any event the employer and employee contribution rates will only increase from 3% to 4.5% in year 7, whereas contribution rates in employment-based schemes are generally at the 5% level for both employers and employees. The issue will not kick in until the AE levels are at a higher level. There is going to be a huge amount of work in defining the standards. It is not just a matter of looking at the contribution rate. That is what can be compared but there are many other issues to look at as well because standards are not about the contributions made in pension schemes compared to the levels in the AE scheme. There are issues relating to supplementary benefits provided by the schemes, the bases of income from under which the contributions are calculated and how to account for the differences in the financial incentives provided through the different schemes. There is tax relief on one hand and the State top-up on the other. To put it fairly simply, does a scheme give other benefits? Does it have a death-in-service benefit? Does it have a spouse's pension? How is it calculated? Is it calculated on gross pay? AE is calculated on gross pay. That includes overtime and any extras an employee gets. However, most pensions schemes are actually based on basic pay. There is a good bit of stuff here. We looked at it and felt that at the end of year 6, at the latest, and we could do it sooner – I am happy that we could look at it sooner – but at the end of year 6 at the latest is the best time to do it because the contributions will have ramped up at that stage.

Deputy Sean Sherlock

I take it the Minister is not accepting my amendment.

Deputy Heather Humphreys

I am not.

Deputy Sean Sherlock

That is for the record. What I will have to do is take what the Minister is saying away and kick the tyres on it, if that is okay.

Deputy Heather Humphreys

I understand.

Deputy Sean Sherlock

There is no point in making a counterargument if the Minister is not going to accept my amendment. For the purposes of being efficient with time, I will withdraw the amendment with a view to resubmitting it and having thought about what the Minister said, particularly in regard to the other factors that I am not entirely clear about. We will have a look at that. I will withdraw the amendment with a view to submitting it again.

Deputy Donnchadh Ó Laoghaire

If the amendment is being withdrawn, it may be immaterial for now but Deputy Sherlock made a good point. It is important that there are not people who lose out in terms of the employer contribution. The Minister is saying that where it is already through payroll deduction, they will get the benefit of the employer contributions. That is what I understood.

Deputy Heather Humphreys

No. If a person is in a PRSA, the majority of PRSAs are not done through payroll deduction. That means that a person has that pension himself or herself. However, that person can also have an automatic enrolment as well. They can go into AE because it is based on payroll deduction. If there is no payroll deduction for any other pension, that person can have AE.

Deputy Donnchadh Ó Laoghaire

Yes, but my understanding of what the Minister is saying, in the minority of cases where a PRSA comes through payroll, that they cannot have AE.

Deputy Heather Humphreys

No.

Deputy Donnchadh Ó Laoghaire

That is what is at issue here.

Deputy Heather Humphreys

However, the person can stop paying the PRSA through payroll and then qualify for AE.

Deputy Donnchadh Ó Laoghaire

There is still an issue there that needs to be considered further. The amendment will be withdrawn and we can talk about it on Report Stage.

Deputy Sean Sherlock

The core point for us is that there is still, what we call in economic terms, the opportunity cost foregone within the timeframe. I note that the Minister has said that they can have to the beginning of years 4 to 6. She said that it can happen up to year 6, if I am not mistaken in interpreting what she said. We are trying to instill within the legislation clearer timelines to have the system up and running sooner so that people are not through the scheme, depriving themselves of a benefit in the current timeframe, if that makes sense.

Deputy Heather Humphreys

No. Auto-enrolment is available from day one. Nobody is going to lose out. There is very little in this and what we are talking about because if we substitute years 7 to 9 with 4 to 6, we would have to calculate to the end of year 3 and, therefore, the employees will only have had the benefit of 1.5%. It will not have moved on to the next step. That is why I am saying the end of year 6 at the latest, because we are going to go from years 7 to 9. We have to, if the standards of employment to be exempt from AE are to be drawn up by the end year 6 at the latest. There is not a lot in it. It was just because we felt that the impact of the increased contributions would not be seen and it would be better to leave it until we can see that benefit. That is the thinking behind it.

Amendment, by leave, withdrawn.

Section 52 agreed to.

Sections 53 agreed to.

SECTION 54

An Cathaoirleach

Amendments Nos. 6 to 10, inclusive, are related and may be discussed together.

Deputy Donnchadh Ó Laoghaire

I move amendment No. 6:

In page 43, line 17, to delete “6 months” and substitute “1 day”.

This is not our primary objection to the legislation. That primarily relates to the manner of investment. However, we are conscious of the cost-of-living crisis. For somebody on a low income, earning €20,000 a year, the deduction is €5.76 a week or €20 to €30 a month. While to many people that might not be huge, for someone on a low income, it is a bit of money. They may be in circumstances where that €20 or €30 at the end of the month is crucial in terms of bills and so on. I do not think it fundamentally alters the fact that they would be opted in. They would still have to opt out. It does not make it an opt-in system by any manner or means. They would still be auto-enrolled and indeed, re-auto-enrolled, which is something that we would agree with. However, six months to opt out is quite substantial. It means for people who, if under that level of financial pressure, might need access to what is ultimately their own money, six months is a lengthy period. We are proposing they would have that opportunity from day one, albeit, if somebody was asking me for advice, I would probably say to keep it in. Ultimately, it is their money and they should have that option. This structure should remain on the basis that it would not be an opt-in system and that it would be opt-out.

Deputy Heather Humphreys

I thank the Deputy. Pension adequacy is an important objective of auto-enrolment.

In order to ensure this is achieved, it is vital that participation and retention rates in auto-enrolment remain high. Having a mandatory participation period will help greatly with this. If somebody had given me the choice between more money in my pocket or a pension back when I started to work, I would have taken more money in my pocket and forgotten about the pension. However, when you get closer to the pension age, you are glad that you have the pension. It is as simple as that.

We want to get people started and get them in the habit of saving for six months. If they opt out after six months, they will get every penny they paid in back. We leave them go for two years because things happen in people's lives and they need a break. We want to give them the flexibility so that regardless of whatever life events they have, they get that break. After two years we opt them back in again and it is a chance for them to save for six months. If they really want out, they can leave the scheme and get their money back. For the six months that the State tops people up and their employer does the matched contribution, it will stay in a pot. This means that if a person keeps opting out for their entire life, they will still have something at the end. One hopes that things will change and people can get back into saving. If we want to get people into a pension scheme, there is no point in giving them a choice to opt out on day one. That we are giving them all their money back is reasonable.

I take on board the Deputy's points. We looked at the UK model, in which people can opt out immediately. At the other end of the spectrum is the approach in Australia, which does not allow people to opt out at all. Those are the extremes. We said we would look at it. The period of mandatory participation needs to be sufficiently long that people can see the fund build up. People will see after six months how much they have - the sum of how much they have paid in themselves, the top-up and their employer's contribution. They will see a pot there and it might encourage them to stay on. We thought six months was a fair enough balance to strike. In the space of six months, a person earning €20,000 will contribute €150 which will be matched by the employer and topped up by the State. At the end of the six months, the pot of €350 might just encourage them to keep saving. A lot of this starts up when people go into a new job and maybe want to save a little. As the Deputy knows, I come from a credit union background. I would always have said that if you save a little, it is not long adding up and it makes a difference. I do not propose to accept these amendments.

Deputy Donnchadh Ó Laoghaire

That is all right. I can see the arguments. I am very conscious of the cost-of-living crisis that is there at the minute, but I understand the Minister's point. I will press the amendment in any event. I understand the Minister's rationale, but people are under financial pressure.

Amendment put and declared lost.

Deputy Donnchadh Ó Laoghaire

I move amendment No. 7:

In page 43, line 19, to delete “6 months” and substitute “1 day”.

Amendment put and declared lost.

Deputy Donnchadh Ó Laoghaire

I move amendment No. 8:

In page 43, line 21, to delete “6 months” and substitute “1 day”.

Amendment put and declared lost.

Deputy Donnchadh Ó Laoghaire

I move amendment No. 9:

In page 43, line 23, to delete “6 months” and substitute “1 day”.

Amendment put and declared lost.

Deputy Donnchadh Ó Laoghaire

I move amendment No. 10:

In page 43, line 25, to delete “6 months” and substitute “1 day”.

Amendment put and declared lost.

Section 54 agreed to.

Sections 55 to 67, inclusive, agreed to.

SECTION 68

An Cathaoirleach

Amendments Nos. 11 and 12 are out of order.

Amendments Nos. 11 and 12 not moved.

Question proposed: "That section 68 stand part of the Bill."

Deputy Donnchadh Ó Laoghaire

We have a very serious concern about this section and amending it is our primary objective with this legislation. I am disappointed my two amendments have been ruled out of order. I will consider, having spoken to the Chair, whether there is scope to resubmit on Report Stage and I retain that prerogative.

Our approach will not come as a surprise to the Minister because we have been talking about auto-enrolment for some time. In our submission in 2018, we made it very clear that the State should play a lead role at the heart of auto-enrolment and that the NTMA should be central to managing these funds and investing them to the benefit of citizens. Rather than focusing on profits, the NTMA would prioritise the financial well-being of contributors to ensure their comfort in their old age. This is relevant to some of Deputy Ó Cathasaigh's amendments, but using the NTMA would give us greater scope to ensure the money in the fund is put to work for Ireland by investing in green energy, housing projects and other key areas of benefit to society.

Part of the reason we are examining this issue is that we are potentially looking forward to a different future. The pension system was very much structured on the assumption that people would own their own home or be in a secure home by the time they retired. Unfortunately, we no longer have that comfort, so it is important we ensure that if workers will be able to enjoy another pension in addition to the State pension, that pension should have the heft to properly assist them. In the past we have seen the impact of previous pension disasters. The collapse of various pension schemes left workers very vulnerable. It is for that reason we believe the NTMA is the most appropriate organisation. I noted Deputy Bruton made a similar point on Second Stage. We are concerned the approach that is being taken is precisely what the pension industry has been looking for. The breaking down of it into these individual pockets and the individual management fees related to that are hugely beneficial for the industry. We are concerned this is very much a gift to the pensions industry. The industry will benefit from this significantly and it may allow it to enter parts of the market it has not been in previously. I am concerned that could expose the potential beneficiaries of this scheme to increased risk. Deputy Bruton said:

The question of whether it makes sense to have the pension fund split into individual pension accounts with their own risk management profiles and investment strategies has been raised. I am quite persuaded by the argument that, for a fund like that proposed, which is to be managed centrally by the auto-enrolment board, there is a strong case for a policy to maximise the return to the fund in which people would own units.

There is a lot in that. There is also the issue of what happened in Britain with NEST and its large auto-enrolment model, which this is closely related to. A decision was made to change the third-party administrator from a private body but it then had to return to that private body after unsuccessful tendering to find a new supplier. A significant cost was incurred having to return to that particular provider.

I am concerned that this is major legislation. It is a big decision and we need to make sure that anything we set up is robust for the future and for the pensions of Irish workers. I am concerned that this is not the right approach and that it will expose them to further risk. While it may not be the primary beneficiary, the pensions industry will still be a substantial beneficiary rather than the workers, as we would prefer to see. Obviously, the NTMA would require additional staff and expertise but nonetheless, with time, that is absolutely achievable if the political will is there.

My amendments have been ruled out of order but I will be voting against this section. I urge the Minister to consider this again. Sinn Féin was not on its own by any manner or means in making points to this effect to the consultation five or six years ago. Many people are similarly concerned now that the wrong approach is being taken and that we are taking risks that are not necessary in terms of workers' pensions.

Deputy Éamon Ó Cuív

As the Minister knows well, I have huge sympathy with the point about the central fund being managed by the State. I have concerns that the private industry is getting into this in a way that is very cost inefficient. I hope that between now and Report Stage we might look at this again.

Deputy Heather Humphreys

I thank the Chair for the opportunity to respond because I need to clear up some issues. I asked the same questions that each of the Deputies did when I went through this in detail. Although it seemed like a fit, when you look into it and consider it carefully, we are setting up a new, separate State body that will manage and take participants' money and it will be solely dedicated to looking after that. The NTMA invests State money in the international stock market and uses commercial investment managers from private industry to do this. It does not make those investment decisions itself; it uses commercial investment managers to do it and that is exactly what NAERSA is going to do. It will do exactly the same. It will collect the money and give it to industry through investment managers and that is how it will be invested. It is the exact same principle that the NTMA uses.

There is no money going to the pension industry. That is misinformation. There is no money going to it. NAERSA is the body that the Government is setting up. It is a completely independent agency. It will collect the money from all the participants in the automatic enrolment system. It will come through the payroll deductions and will go to NAERSA. It will then invest it in the exact same way as the NTMA invests State money in the international stock markets. I wish to be clear on that.

We do not feel that the NTMA is the appropriate institution for the management of the retirement savings funds collected. The NTMA manages State money and it does not have the systems, the processes, the knowledge or the experience to manage the individual savings and the investment accounts or to conduct the administration of those over many decades. We are talking about running an accounts system for 800,000 people for 40 years with daily transactions. A lot of people will have the deductions on a weekly basis. NAERSA will manage all that. Revenue will deduct it and NAERSA will take that money and manage it. It will also be responsible to the members of the scheme to give them the information they want and to give them statements on what their pots are worth and everything else. It will then invest it on behalf of those members. Its focus is entirely on the members of the scheme.

To give this task to the NTMA would be to add something very new to its long list of existing functions. The Government is of the view that auto-enrolment is so important that it needs to have a dedicated expert function and therefore, it has chosen to establish this new body for that purpose. That is why it is so important that is has its own independent agency, which is properly regulated and constituted and whose sole purpose is to look after the interests of the members of that scheme.

Deputy Donnchadh Ó Laoghaire

There are a couple of points. I am talking about section 68, which is titled "Investment Management Providers". Section 68(1) states that "The Authority shall appoint a person or persons to provide investment management services for the purposes of this [Act]." While it does subcontract with private industry, which is no secret, the NTMA has clear desired outcomes in mind. It has clear things in which it does not wish to invest and has clear strategies in this regard.

Also, the Minister stated that the pension industry is not getting any money. No one is suggesting that it is getting the contributions or that it is benefiting directly from the State or that the top-up is going into the pocket of private industry. However, it stands to reason that the fees that will necessarily be charged, and obviously must be charged as they are contracted by NAERSA, surely will be much the greater for each individual account than would be an accumulated amount from managing a fund as a whole. There is a lot more labour involved in that and more potential benefit for the industry in that regard. It also gives the industry a heft in terms of the State's top-up. It will now be responsible for large amounts of money that it can invest perhaps in areas that it might previously have been reluctant to do.

Deputy Sean Sherlock

There was genuine scepticism on the part of many people, including ourselves, in the setting up of this authority. We similarly looked to the NTMA as being the natural organ to manage this. Having said that, and to repeat the point in relation to the new authority, I refer to ensuring that workers' representatives like ICTU are on the board of the new authority. That is an important point for this new authority because that facility would not necessarily be available through the NTMA.

We are happy to accept the bona fides of the new authority purely on the basis that I take some comfort from the Minister's own language within the legislation around the need for employees to be represented. I will repeat the point again, however, that per the amendment we have put forward, it is vitally important that the most authoritative body on workers' rights, namely, ICTU, should have a place on that board.

Deputy Heather Humphreys

It is fair to say that NAERSA will collect all of the contributions from employer, employee and State top-ups. It will have it. The investment managers will only have one account. There will not be individual accounts. It will all be managed through NAERSA.

The point I wish to make is that there are economies of scale there because we are pooling all of the contributions.

There will be three different pots of low risk, medium risk and high risk so people can decide which pot they prefer. If people do not want to make a choice there is a default pot, which we will choose.

This is a massive task that was given to the NTMA. It would have to do exactly what we are doing in terms of setting up a whole system to collect and then pass the money on to the investment managers. What we are doing here is making sure that this is robust and is accountable to the Minister and the Oireachtas but, most importantly, this is accountable to the interests of the people who contribute. It is their money and we should not forget that. This is not State money. This is the money of the members of the scheme. It is the duty of NAERSA to make sure that this money is looked after in a proper and safe way through their investments.

Question put and declared carried.

SECTION 69

An Cathaoirleach

Amendments Nos. 13 to 15, inclusive, are related and will be discussed together.

Deputy Sean Sherlock

I move amendment No. 13:

In page 51, line 15, after “subsection (3)” to insert “ and at least one ethical and environmental fund”.

I note the comments made by the Minister about people being able to decide into which pot they want to put their moneys. The kernel of that is that this is the people's money, not the State's money, so choice should be given to the workers who invest in these pots, particularly in these times as a significant proportion of people will want to make ethical investments in respect of their future pension pots. I think that is a statement we could all stand over. On that basis, in these environmental, social and governance, ESG, conscious times, where people do not want to make investments, as has been said by Deputy Ó Cathasaigh, in munitions or in companies or entities which are extractive by nature and where there is the potential to damage the climate and the environment, then that choice should be given to those workers.

Deputy Marc Ó Cathasaigh

I have given consideration to the amendment tabled by Deputy Sherlock and it is another way of skinning the cat. Some of my later amendments go to the idea of divestment, particularly in respect of fossil fuels and the arms industry but amendment No. 13 is another way to skin that cat. Within a private pension I can avail of the option to invest in an ESG-friendly green pension product and in that way choose where to spend my money. That will not be an option with the current wording of the legislation for people who are in auto-enrolment, which will be a large number of people.

There is another thing that we could achieve with Deputy Sherlock's amendment. We know there is an element of choice, as in people can choose their investment, which is to the good. There is also a level of inertia and we know from auto-enrolment systems across the world that very often the one that somebody defaults into is the one to which they will remain loyal. We are all the same when it comes to banking products. We tend to look away and not do due diligence to make sure we are happy with where we are currently. I think Deputy Sherlock's amendment makes a lot of sense and I am sure the Minister will have a view on it. The amendment would give an option either through the default or through choice for somebody to make the decision that he or she wants his or her money invested in a particular way.

The purpose of amendment No. 13 differs from the purpose of my two amendments, which are part of this group of amendments. This section is about the level of risk that can be taken. My two amendments are agnostic in terms of fossil fuels, ESG considerations or whatever else. My amendments say that climate risk in investment practices should be explicitly factored into the equation. There are plenty of examples of this worldwide. We know it is not going to be a good example to make long-term investments in properties on the Florida Keys. Anybody who saw the excellent programme recently "Rising Tides: Ireland's Future in a Warmer World" with Philip Boucher-Hayes will know there is a whole town in Wales, God help it, where the Welsh Government has said it is not going to be able to afford to protect the town in the long term, so the value of properties there has crashed and everything that goes along with that. It is tragic situation for that town. Similarly, we should make explicit within legislation that there are climate risks that go with different types of investment, which should be factored in when the Minister makes regulations prescribing the type of risk, scale and methodology that should be used. My amendments suggest such provision can be inserted into two separate places. Both of my amendments use practically the same wording and seek the insertion of the words "with particular reference to the latest custom and practice regarding the pricing of climate-related risks” to make this explicit in the legislation and ensure this is part of the risk profile that investors are asked to take cognisance of when making investments on behalf of the people.

Deputy Donnchadh Ó Laoghaire

I support the amendments as such provision is very desirable.

Deputy Heather Humphreys

I will discuss amendments Nos. 13 to 15, inclusive, together but propose different approaches to them. I do not propose to accept amendment No. 13. I note this section provides for the establishment of investment funds with various levels of risk into which participants' contributions will be placed. Each of these investment funds will have environmental, social and governance, ESG, principles embedded into their design. In that context, it can be said that each of the fund offerings under the Bill is in fact an ethical fund.

Section 74 sets out the investment rules that will be applicable to contracted service providers. This section ensures that ESG considerations will be taken into account when the investment management providers invest participants' savings.

In addition, section 75 provides that the obligations of the State, under international agreements on environmental, sustainability and climate change must be taken into account in the framing of the investment management contracts. The State's obligations with regard to relevant international agreements, although not needing to be specified in the Bill, include the sustainable finance disclosure regulations, the UN Global Compact and Paris Agreement, which guide the international community on matters such as carbon emissions and investment in unethical assets. The inclusion of these measures ensures that ESG concerns are well represented in the AE system. The inclusion of an additional and highly specific fund would add to the cost of the system which would be borne by the participants. This is because the system is based on a default approach whereby the inertia of participants will mean that almost all of those enrolled will not make an active decision in respect of the investment of their contributions. Evidence in the UK has shown that 99% of those places in nest funds remained in default funds despite a range of alternative options being made available.

Finally, I note that there is not agreed understanding or definition of an ethical fund. Most work in this area, at an international level, has concentrated on a range of environmental, social and governance factors that influence where and how investment occurs with a view to a more positive outcome that might otherwise be achieved if these factors were ignored in favour of pure monetary outcomes. I reiterate that there is no universally agreed definition of the term.

I do not propose to accept amendments Nos. 14 and 15 at this time. However, I believe they merit further consideration. On that basis, I will refer them to the Office of the Parliamentary Counsel to see how they could be accommodated as amendments on Report Stage. Amendment No. 13 differs slightly.

I hope the Deputies will accept the need to do so and will take it that Deputy Ó Cathasaigh's amendments will be revisited on Report Stage.

The two amendments are slightly different. I know they are grouped but amendments Nos 14 and 15 are slightly different. I believe amendment No. 13 would add considerable cost to it.

Deputy Sean Sherlock

I thank Deputy Ó Cathasaigh for his unwavering and unambiguous support for the Labour Party amendment. I note the Minister will revisit amendments Nos 14 and 15 and I acknowledge that. I will withdraw the amendment and I will revisit the issue again on Report Stage.

Deputy Marc Ó Cathasaigh

I think we would accept the amendments are quite different in ambition and scope. I have amendments later on which I am confident that the Minister will take a similarly dim view as she has of amendment No. 13. I do not suppose all my amendments will be as successful as these, in terms of going back to the Office of Parliamentary Counsel. I thank the Minister for taking it on board. It is far less consequential an amendment than amendment No. 13. It just makes explicit that when we are looking at risk, although financial risk on the one hand, we should also look at climate risk.

Regarding the argument on amendment No. 13, I think we all know there is ESG and ESG innit. Sometimes, these environmental, social and governance concerns are applied rigorously and less rigorously at other times. As long as we get the balance right in the legislation we are making sure the investments of the Irish people is being put to good use, then I think that we can probably all live with that.

Amendment, by leave, withdrawn.

Amendments Nos. 14 and 15 not moved.

Section 69 agreed to.

Sections 70 to 73, inclusive, agreed to.

SECTION 74

An Cathaoirleach

Amendments Nos. 16 to 19, inclusive, and amendment No. 22 are related and will be discussed together. These are all under Deputy Ó Cathasaigh’s name.

Deputy Marc Ó Cathasaigh

I move amendment No. 16:

In page 54, between lines 28 and 29, to insert the following:

"(a) shall not invest those resources, directly or indirectly—

(i) in equity or debt securities issued by a munitions company as defined in Part 4 of the Cluster Munitions and Anti-Personnel Mines Act 2008,

(ii) or any financial derivative instruments, insurance policy, exchange traded fund or collective investment undertaking, whose underlying assets include equity or debt securities issued by a munitions company as defined in Part 4 of the Cluster Munitions and Anti-Personnel Mines Act 2008,”.

Deputy Sherlock can see if my good luck holds. This is the main piece. It does reflect some of the consideration we had in pre-legislative scrutiny in the committee. We made a strong recommendation on this, recommendation No. 15, in the PLS report. It stated that, in the view of the committee, money invested through auto enrolment should not be invested in things such as cluster munitions or in fossil fuels. Amendment No. 16 speaks directly to that. It cites the Cluster Munitions and Anti-Personnel Mines Act 2008. We have passed law in this regard. In Ireland, we do not agree that these types of munitions are acceptable. We do not want any of our money tied up in cluster munitions or anti-personnel mines, both of which we know disproportionately affect children. If we did not know that before now we need only look at some of the conflagrations that are happening throughout the world at the moment.

Amendment No. 17 also cites existing legislation, namely, section 49A of the National Treasury Management Agency (Amendment) Act 2014. That is with regard to fossil fuels. The NTMA has decided that it does not want to do business with fossil fuel undertakings and it does not want to be involved in financial derivative instruments, insurance policy exchange traded funds or collective investment undertaking whose underlying assets include equity or debt securities.

I do understand that it can be difficult to identify that sometimes and that is why that flexibility was built into the Act. In engaging with the Minister, Deputy McGrath, on the climate and infrastructure fund, I have had that discussion on how sure or otherwise one can be of where one’s money is going. I am open to the fact that people can make mistakes or the nature of companies can change over time. They may start out investing in one thing and then move into another. I accept all of that. But the basic premise as put forth by the committee during our pre-legislative scrutiny is that we do not want Irish money invested in these things. I do understand the argument that we give tax relief to pension contributions made at the higher level and you get your 40% or whatever else to invest in your private sector pension and we do not have the same level of oversight of where that money goes despite there being State intervention in terms of tax expenditures but I do not think the point of convergence should be downwards. The point of convergence should be upwards and this is our opportunity, with the auto enrolment scheme, to build in those values.

Amendment No. 18 is very simple. Section 74(2) has seven provisions in paragraphs (a) to (g), inclusive. Six of the seven provisions use the language of “shall” and paragraph (b) uses “may”. I would like to strengthen that.

Amendment No. 19, provides an additional piece to be inserted in section 74(5), whereby “'best long term interests' means the highest possible value of the pension, as well as the best possible health of the environment and society in which the participants live”. We all know that you do not eat money. If we think of this fictitious person who might benefit from this legislation in 2065, it will not matter a hoot if they have a great big pension pot but the world around them is burning to the ground. We should not make long-term investments blind to that fact. In fact all of our financial systems at this point should be bent away from pure profit making and towards ensuring that we have the sustainability principle embedded in everything we do as a society. And by the sustainability principle, I mean that we provide for the needs of the current generation while allowing for future generations to also have a good quality of life. This is just a definitional piece to embed that in the legislation and so that we are not just talking about the best outcome for the pension pot but that the best long-term interest means having a pension pot and a society within which you can spend it and an environment which will sustain that society.

As I said, Deputy Sherlock can see whether my luck holds on these more consequential amendments. They do derive from the discussions we had in the committee during pre-legislative scrutiny. I would like to hear the Minister’s views on them.

Deputy Éamon Ó Cuív

The committee recommended something slightly wider but I accept the principle of what Deputy Ó Cathasaigh is trying to do. It said “The Committee recommends that the investment funds be prohibited from investing in fossil fuels or the arms industry.” I think Deputy Ó Cathasaigh has spoken very clearly about fossil fuels. The simple fact is that if we keep investing huge sums of money in fossil fuels, there will not be much point in talking about long-term pension funds because all sorts of consequences will flow. But we are also living in a world where probably the greatest growth industry, and Europe is part-central to this, is armaments – not just cluster munitions and anti-personnel mines. Moreover, the biggest producers are the developed world; China, Russia, Europe and America. We, as members of the European Union, are part of a massive arms industry.

That industry is promoted actively by the European Union. We kowtow to the countries but in the past we tried to limit the spread of nuclear arms. Somebody has to call halt. I believe a clear statement is needed here that we would not invest anything in the arms industry. I ask the Minister between now and Report Stage to see how this could be done. Every day we see people across the world with developed world arms threatening each other. At the same time there is hunger and poverty around the world. There are plenty of good things to invest in, such as renewable energy. Unfortunately I would say if you went to the stock market, you would find the armaments industry is probably the most profitable of all at the moment. I ask the Minister to consider it very seriously. You might say that funds from Ireland would not make a difference but I think a statement would. Things tend to spread and we would expect that other people would follow suit.

Deputy Sean Sherlock

I wholeheartedly support amendments Nos. 16 to 18, inclusive. On amendment No. 18, section 74(2)(b) in respect of the investment rules allows wriggle room for funds to get off the hook regarding investment decisions on ESG. I am not being in the slightest bit facetious on this one, but if Deputy Ó Cathasaigh intends to press the amendment we would certainly support it.

Deputy Marc Ó Cathasaigh

I meant first to make the case for amendment No. 22, which I think is grouped as well.

An Cathaoirleach

Yes, it is.

Deputy Marc Ó Cathasaigh

This is just an expansion of a provision that is in there already. We are looking at section 75(3). The amendment provides that: "An investment management contract shall include provision for enabling of the achievement of the obligations of the State under international agreements on environmental sustainability and climate change and national obligations under the Climate Action and Low Carbon Development Act 2015 (as amended) in carrying out the contract."

That circles around to the second point I wanted to make in response to Deputy Ó Cuív's contribution. The reason my amendment speaks specifically to cluster munitions and anti-personnel mines is that I have a piece of legislation to hang my hat on. I do agree that I would prefer if we did not go near munitions at all. It was simply that I had a specific piece of Irish legislation that I could advert to when writing the amendment. In the case of three of these amendments, I am looking at pieces of underpinning legislation that already exist within the national context.

Deputy Heather Humphreys

I do not disagree with some of the comments that have been made here in terms of the armaments industry and all of that. However, we have to remember that this is not State money. This is the money of the citizens who contribute through the automatic enrolment process. They also have property rights. This is their pot and their money. I do not propose to take on board these amendments but I do propose reverting to the OPC on one of them for further consideration.

I will go through them all now in detail. What I am saying is that people in auto-enrolment would be restricted whereas people getting the 40% tax back would not be restricted. To me it would be an inequitable treatment of the lower paid workers who will benefit from automatic enrolment. I am going to go through the amendments in specific detail but that is why. I do take on board what the Deputies are saying but if it is going to be applied, it has to be applied to everything. It cannot just be applied to automatic enrolment and the investment of the money that comes from the members and the citizens. They should not have to reach a different standard than others. That is the basic point I am making.

In respect of amendments Nos. 16, 17 and 22, which are similar in purpose, I need to emphasise that the new authority will not be administering a new State fund but rather will be administering hundreds of thousands of individual savings accounts that are and will remain the personal property of the AE participants. The AE project is, in that sense, a State-incentivised personal retirement savings scheme for individuals rather than a new national fund. It is very important that we treat AE participants' money on a par with those invested in occupational or supplementary private pension schemes and that we do not AE participants' investments into overly concentrated or niche risk profiles.

On amendment No. 16, the Deputy has referenced prohibiting investments directly or indirectly in various asset classes that include munitions companies. The practicality of this provision presents difficulties as to how it could be known whether an investment indirectly contains the prohibited companies. How far does the term "indirectly" go? Would it be even possible to determine this? Would any investment management company sign up to such vague terms and conditions? There is arguably no such thing as a derivative investment that could be analysed to this level of detail in a timely manner. On that basis, I cannot accept the amendment. Furthermore, the definition of the types of munitions companies - cluster munitions and anti-personnel mines - is quite narrow. The proposed amendment still means that investment could be made in all sorts of other arms.

On amendment No. 17, I would note that the NTMA, which is covered by the fossil fuel provision, can actually invest more flexibly under the 2014 Act than NAERSA would be able to do under this Bill if the Deputy's amendment were accepted, which I do not propose to do. I have the same concerns around the appropriateness and workability of amendment No. 22.

Turning to amendment No. 19, I will point out that the setting of a definition of the best long-term interests of participants cannot be easily measured. In terms of what constitutes the best possible health of the environment and society in which the participants live, none of us really knows what that means, how it could be defined or how it would interact with the goal of the best long-term financial interests of participants. For that reason, I do not propose to accept amendment No. 19 either.

Finally turning to amendment No. 18 in this grouping, I do not propose to accept this amendment at this time but I do think the amendment merits further consideration, so I am referring it to the Office of the Parliamentary Counsel to see how it can be accommodated as an amendment on Report Stage. I trust this represents something of a positive compromise for Deputy Ó Cathasaigh, to be provided for very shortly.

Deputy Éamon Ó Cuív

I hear what the Minister is saying about people's money but the NTMA money is people's money. It is taxpayers' money.

Deputy Heather Humphreys

It is not the same.

Deputy Éamon Ó Cuív

Well, it is and it is not. Property rights are not absolute, they are subject to the exigencies of the common good. There was a myth going on for many years, which we busted, that they were nearly absolute. People seem to have missed the saver clause in the Constitution, which is very clear. You cannot abolish property rights, but you can control them and limit them. We have seen good examples of that in the last 20 years. I hear the Minister's argument about private investors. That is an issue that needs to be tackled on another day, that is, investment in private funds. We are living in a very dangerous world. It is a matter of major concern that our money would be going, knowingly or unknowingly, into the arms industry. I do understand the complexity of this. People did not seem to understand that many years ago but I am glad that understanding has arrived.

I am glad the Minister is looking at the matter in accordance with the prudent person rule referred to in section 74(1)(a) regarding "may" or "shall". It is extraordinary that it says "may" take into account the potential long-term impact of investment decisions on environmental and social governance factors.

I hear what is being said in respect of this being looked at again. I can see why this would happen. For the life of me, I cannot understand why it is not "shall". It seems very obvious that these factors would have to be taken account of. I would hope it will be possible to perhaps go some of the way in this regard regarding this tier of investment. One way to go about this would be to put in human safety or human well-being criteria. In other words, we would not invest in something that is going to blow the whole lot of us up. Investment decisions could be made in the context of taking into account environmental, social, human well-being and governance factors. The Minister has all the resources to figure this out. I do not.

Deputy Heather Humphreys

I do not have all the answers.

Deputy Éamon Ó Cuív

It can be done. There is always a resistance but I do not believe in the ultimate free market against the common good. When we are dealing with the common good, then we must weigh this in as a major factor. We control property every day. Just ask any people in my constituency what they can do with their farm or whatever. There are so many rules now that most complain they cannot do anything, so I do not buy the private property argument.

Deputy Marc Ó Cathasaigh

I thank the Minister with regard to her taking amendment No. 18 back and having a look at it. It may look like throwing the dog a bone, in that it is the smallest and least consequential of these amendments. It is consequential, though, because strengthening this language can make a difference, even if it is only the substitution of a single word. I thank the Minister for taking this on board.

Regarding amendments Nos. 16 and 17, if the problem is the line, "shall not invest those resources, directly and indirectly", and this is found to be poorly phrased or placing too much of an onus on the pension managers, then this is one thing but that is not the consequential piece of the amendment. These are two provisions that exist already within our national law.

Building on the point made by Deputy Ó Cuív regarding private property, it is established in the Constitution that private property is subservient to the common good. Amendment No. 19 really goes to this idea of the common good. I accept the Minister's argument that this is not something well defined anywhere in law, or at least not that I can find. By God, though, we better figure out how to define it. The longer we keep defining the positive outcomes of our social and economic system based on a bottom line that just measures money, well then the deeper down the hole we dig ourselves.

Great work is happening around natural capital for example. Natural Capital Ireland is doing great work in this context. It is about how we can make this aspect appear on balance sheets. Great work is also happening in government in terms of the well-being framework, where we are trying to move away from a GDP-defined model of economic success to something that looks at what it is like to live within this society. I accept the Minister's rationale around amendment No. 19. We do not have a framework where we can do this work as yet. We would, though, want to get there because the clock is ticking.

On amendments Nos. 16 and 17, the other thing here concerns a situation where people are in an auto-enrolment scheme. The Minister stated there is no desire to differentiate between people in private schemes in respect of giving them the tax relief and all the rest of it but, as I said before, if I am in a private pension scheme, I can make a choice. If I am investing privately, I will deliberately ensure that my money is not placed somewhere I do not agree with, especially concerning cluster munitions, etc. I do not see this flexibility existing within the auto-enrolment scheme context. I acknowledge that the vast majority of people who will end up in this mechanism will default to whatever product they are offered and will not look too closely at it after that. A certain subsection of people, however, will say they would like to have their money spent in a particular way while they are preparing for their pension and that there are places where they would not want that money invested.

In the legislation as it stands currently, though, I do not see where this level of agency or choice exists. As the Minister said, this is, ultimately, people's private property but will people have the facility in the context of this legislation to make these kinds of ethical choices regarding where their money ultimately will be invested? This is where this legislation circles back around to the argument for Deputy Sherlock's idea of having a separate fund but we are not pursuing this aspect this evening.

Deputy Donnchadh Ó Laoghaire

To make a point general to all these amendments, and I support all of them, I do not think anyone is proposing that bad investments be made. I do not think anyone is suggesting that suboptimal investment decisions be made. I know that is not what the Minister is saying either. I think the proposition, though, is that in all these contexts, what we are trying to do is eliminate a tier of investments that might be made that would make financial sense but that would be ethically unconscionable. I do not think anybody wants to see this happen. I am quite sure the Department does not want to see it.

It is then a question of whether the legislation does enough to ensure this type of investment is prevented. As I instanced earlier, would it be possible for us to have a situation in future where through some journalist making investigations, it is revealed that NAERSA is allowing investments to be made into something absolutely unconscionable, whether this might be to do with munitions or some organisation connected to child labour or any number of investments of this type? The Minister of the day would then be saying that he or she was not aware of what was happening, had no remit because the decisions made were very much ones for NAERSA and the organisations with which it has contracted and consequently had no role in that regard. I do not think that is the outcome the Minister wants to see or any of us want to see either. All this is predicated on assuming the best possible investment is made to ensure that people's money is safeguarded to the greatest extent possible and this does not happen in instances, very limited ones I would hope, where it is achieved off the back of exploitative or harmful investments.

Deputy Heather Humphreys

I do not want to see anything invested in the armaments industry, no more than do any members of the committee. I must look at this context here, though, from the point of view of the contributions of the citizens of this country. These are contributions. Money, of course, goes into the NTMA. While that is garnered by taxation, the money in this case does not come from taxation. These are contributions people are making into a savings pot for their retirement and it is governed by social justice principles. It must be proportional in how it is administered. We cannot, therefore, treat people who are a part of an auto-enrolment system differently to people who are not.

In terms of occupational pensions, if people have a pension in their workplace, they cannot decide where the money is invested. That does not happen. It is invested for people. People make their contributions and that is it. It must be remembered that everything we are doing here through auto-enrolment is governed by the ESG principles. This is the governance stipulation in place. It is written into the legislation. I honestly think, therefore, that we have put a lot of safeguards in here to ensure the money is appropriately invested. None of us want to see these funds going into the armaments industry. I must, however, also be careful. If we are going to take this a step further and attach these sorts of conditions to these investments, then they must apply right across the board to all State-incentivised investments. I do not want to see the people contributing into the auto-enrolment system being treated any differently to anybody else.

Deputy Éamon Ó Cuív

We have all been involved with bodies that have received Government grants, including sports clubs and community groups. The Minister has responsibility for granting much of this money.

Deputy Heather Humphreys

I do.

Deputy Éamon Ó Cuív

Are conditions attached to the grants?

Deputy Heather Humphreys

Yes.

Deputy Éamon Ó Cuív

This is, of course, the case with these grants. There is State money going in here too and conditions can be put on it. It is a very simple principle. I find it difficult, therefore, that there is this idea of absolutism here. The Minister said the principles of ESG are built into the proposed legislation. Obviously, however, this is built into section 74(2)(b), where we have this word, "may". In her own heart and soul, I think the Minister would probably wonder why this came out as "may" instead of "shall". This is basically where the ESG principles referred to are written in, is it not?

Deputy Marc Ó Cathasaigh

I will again make the point I made at the outset. I do not, at the moment, get to legislate on anything else that is happening in the pensions industry. We are getting an opportunity to look at legislation to do with what will become a substantial part of our pension provision State-wide. I strongly feel that if we are looking at convergence, we should converge upwards and not downwards. We should not use an argument to say that it does not apply elsewhere and, therefore, we should not apply it here. It would be like saying we will not do away with corporal punishment at primary because they are still beating fellas in secondary school. I do not think I would live with that either.

I understand they are difficult, and I knew they were going to be the more difficult amendments to make the argument for when I submitted them. As I said, we should be ambitious. On amendment No. 19, I understand the Minister's rationale but by God we better get to a place where we can describe the common good and shared well-being on a spreadsheet because otherwise, our goose is cooked. Similarly, we should try to ratchet up, in terms of the intentions that we want for pension provision and investments all across our economy, State and society, rather than accepting a status quo and saying we are going to bring ourselves into that.

Deputy Heather Humphreys

I just have concerns that we would be treating, in an inequitable manner, the lower-paid workers who would benefit from auto-enrolment. I would be very concerned about that. As I said, with regard to the word "may", I will be talking to the OPC and I expect to be in a position to change that to "shall". I will leave it at that.

An Cathaoirleach

How stands amendment No. 16?

Deputy Marc Ó Cathasaigh

I think these amendments will live to fight another day, Cathaoirleach. I will withdraw it.

Amendment, by leave, withdrawn.

Deputy Marc Ó Cathasaigh

I move amendment No. 17:

In page 54, between lines 28 and 29, to insert the following:

“(a) shall not invest those resources, directly or indirectly—

(i) in equity or debt securities issued by a fossil fuel undertaking as defined in section 49A of the National Treasury Management Agency (Amendment) Act 2014,

(ii) or any financial derivative instruments, insurance policy, exchange traded fund or collective investment undertaking, whose underlying assets include equity or debt securities issued by a fossil fuel undertaking as defined in section 49A of the National Treasury Management Agency (Amendment) Act 2014,”.

Amendment, by leave, withdrawn.

Deputy Marc Ó Cathasaigh

I move amendment No. 18:

In page 54, line 33, to delete “may” and substitute “shall”.

Amendment, by leave, withdrawn.

Deputy Marc Ó Cathasaigh

I move amendment No. 19:

In page 55, after line 41, to insert the following:

“ “best long term interests” means the highest possible value of the pension, as well as the best possible health of the environment and society in which the participants live;”.

Amendment, by leave, withdrawn.

Section 74 agreed to.

SECTION 75

Amendments Nos. 20 and 21 not moved.

Deputy Marc Ó Cathasaigh

I move amendment No. 22:

In page 57, to delete lines 6 to 8 and substitute the following:

“(3) An investment management contract shall include provision for enabling of the achievement of the obligations of the State under international agreements on environmental sustainability and climate change and national obligations under the Climate Action and Low Carbon Development Act 2015 (as amended) in carrying out the contract.”.

Amendment, by leave, withdrawn.

Amendment No. 23 not moved.

Section 75 agreed to.

Sections 76 to 127, inclusive, agreed to.

SECTION 128

Deputy Sean Sherlock

I move amendment No. 24:

In page 88, between lines 17 and 18, to insert the following:

“(2) The Revenue Commissioners may share information with the Authority and a specified body where an employer makes no payment of enrolments and contributions for the benefit of employees to a qualifying occupational pension scheme, qualifying PRSA or qualifying trust RAC.”.

The Cathaoirleach is on a roll, and I hate to halt his momentum. I will be very brief. I do not think we should be so naive as to think that there will not be employers who will lean on workers not to subscribe or to leave the auto-enrolment scheme. I know the Minister will say there are provisions in the Bill that make it an offence for an employer to penalise, threaten or hinder an employee from participating in the pension auto-enrolment savings scheme. That is acknowledged, and let that be said.

However, the purpose of the amendment, in essence, is to allow for the use of the Revenue Commissioners' payroll information to flag to the authority any suspicious activity where no payment of auto-enrolments or pension contributions have been made. That is it, effectively. I do not think we should lean too much on the worker to blow the whistle, where it is very difficult, in my humble opinion, for whistleblowers to emerge, particularly where you have an employer who is coercively controlling an employee. What we are trying to do is give some sort of comfort to the worker and maybe use the Revenue Commissioners as a tool in that aim.

Deputy Heather Humphreys

We do not need this amendment because it is already in the Bill. The Bill already provides for relevant information sharing arrangements, and these are set out in Part 7. In particular, section 108 provides for a specified body, which includes the Revenue Commissioners, to share with the new authority any information that is necessary and proportionate for the purpose of the performance of this function. These functions include extensive compliance and enforcement functions, as well as the collection of contributions in all relevant circumstances, which include circumstances where no payments are being made to alternative pension schemes referred to in the proposed amendment. It is there already.

Deputy Sean Sherlock

That is fair enough. I take the Minister's point, and I will withdraw on that basis but before withdrawing, the word "may" is the bête noire of every Opposition TD who ever came into this place. I have been on the Minister's side of the fence, and I have used the word myself. One minute you are playing in Opposition, and the next minute you are playing for the Government, and that is the way the cookie crumbles.

An Cathaoirleach

Junior hurling versus senior hurling.

Deputy Sean Sherlock

Given the fact that it has been raised here in the legislative process in these Houses, I ask if we can at least make the case for the word "shall", and for this to be revisited or for the wording to be strengthened in some way on Report Stage. I would be very grateful for that.

Deputy Heather Humphreys

There is no naivety here. There are extensive provisions with regard to employer compliance, information-sharing, and the anti-victimisation of employees, including employees having recourse to the WRC for the last point. We do not need the amendment because it is already there.

The point is that from day one when you take somebody on, you enrol them in auto-enrolment. That is it. That is the law. There is no equivocation. The information will be shared with the new authority by the Revenue Commissioners, so that will show if people are not making the necessary deductions.

An Cathaoirleach

How stands the amendment?

Deputy Sean Sherlock

I will take what the Minister says at face value. I note her bona fides in this respect. I will withdraw the amendment.

Amendment, by leave, withdrawn.

Section 128 agreed to.

NEW SECTION

Deputy Sean Sherlock

I move amendment No. 25:

In page 88, between lines 17 and 18, to insert the following:

“Hindering the displacement of occupational pension schemes

129. An employer shall not wind up or freeze a qualifying occupational pension scheme in place after the commencement of this Act for a period of 10 years.”.

Again, it speaks to my original amendment No. 3 on essentially building in firewall provisions to protect employers responding to the cheaper pension auto-enrolment option by closing down good workplace pensions. That is essentially what it is.

Deputy Heather Humphreys

I thank Deputy Sherlock. I do understand his concern, which has been conveyed to me also by the trade union representatives through the LEEF subgroup on pensions. However, the proposed amendment cannot be incorporated into the AE Bill at this time as it is subject to ongoing legal advice. The preliminary legal opinion suggests that such a provision would be unconstitutional with regard to infringing the property rights on the right to earn a livelihood of employers.

I do understand the intent behind the amendment. Some worker representatives fear that the introduction of AE will lead to the levelling down or closure of existing occupational pension arrangements. However, I do believe that this will not materialise. My Department has found no evidence whatsoever that such a scenario has occurred following the implementation of an AE-type system in other jurisdictions. Indeed, despite significant concerns in the UK that AE would result in the levelling down of existing pension arrangements, as I said before, what came to pass was that many employers decided to improve their existing pension plans by contributing more than the minimum contribution rates. They saw such an offering as a benefit to aid the recruitment and retention of employees. I believe, and I hope, the same result will happen here in Ireland. We are in a competitive labour market and employers want to attract good staff, and in order to do that they have been upping their offering in terms of the occupational pensions they provide. They have improved their schemes. We are one of the last countries to come to the table in terms of auto-enrolment. As I said, the evidence is that employers have improved their schemes and membership has increased rather than decreased, so I do not think the amendment is necessary.

Deputy Sean Sherlock

I thank the Minister. I will withdraw the amendment on the basis that I can revisit it on Report Stage with a view to the Minister perhaps expanding on the preliminary legal advice that she has received. It would be very useful and informative for us to have a greater insight into that legal advice. I withdraw the amendment.

Amendment, by leave, withdrawn.

Sections 129 to 141, inclusive, agreed to.

Title agreed to.

An Cathaoirleach

Do Members wish to put any final questions or make any comments on the Bill before we conclude?

Deputy Donnchadh Ó Laoghaire

The Title has been agreed. Has the Chair put the question on-----

An Cathaoirleach

We will come to that in a moment.

Deputy Donnchadh Ó Laoghaire

That is fine. I do have a question.

An Cathaoirleach

The Deputy should go ahead.

Deputy Donnchadh Ó Laoghaire

Approximately when is it anticipated that Report Stage will be taken?

Deputy Heather Humphreys

On 29 May.

Deputy Donnchadh Ó Laoghaire

Okay. I thank the Minister.

An Cathaoirleach

Does the Minister wish to make any closing remarks?

Deputy Heather Humphreys

I thank the members of the committee for their work on the pre-legislative scrutiny and their co-operation here today. I acknowledge the work of the staff on the Bill as well. This is a massive Bill and I am very pleased that we have been able to bring it through Committee Stage. I look forward to Report Stage. It is going to make a huge difference to the lives of so many - 800,000 people. Some of us may not see the effects down the road, as it will be 40 years from now, but it is game-changing. I thank the Cathaoirleach and the members of the committee for their work and contribution to the Bill.

An Cathaoirleach

I thank both the Minister and her officials for assisting the committee with our consideration of the Bill.

Bill reported without amendment.