Companies looking to manage funds under the new compulsory workplace pension scheme have been invited to tender for the business by the Department of Social Protection.
The Government has said it plans to introduce auto-enrolment, which will capture up to 800,000 workers between the ages of 23 and 60 and earning more than €20,000 who are not currently part of a pension plan, at the end of September.
The department says it is looking for three investment managers, each of whom will provide fund options of low, medium and high risk. Investment managers interested in the business have until April 7th to pitch for it.
Department officials had originally signalled in the autumn of 2023 that they would initiate the tender by the end of that year and that four successful bidders would be signed up in the second quarter of 2024.
The “request for tender” document says that there may be €21 billion in assets under management in the My Future Fund – the name given to the auto-enrolment scheme – within 10 years.
The document, filed on the Government’s etenders site, sets a cap on any all-inclusive annual management charge of 0.1 per cent of the assets under management.
The firm offering the lowest management charge will secure 40 per cent of the available marks in the entire tender process. Managers with higher charges will receive lower points under this category.
The weighting for the design of the investment funds at 21.5 per cent, the experience of the investment management team at 10 per cent and a 9.5 per cent weighting under the heading of sustainable investing and social responsibility are all noticeably subordinate to the charging structure.
Investment groups such as Amundi, Irish Life’s investment management arm and State Street Global Advisors are expected to be among bidders for the investment management contracts. However, there are concerns in the industry that this will lead to “generals” in all asset classes, rather than specialist managers in particular assets.
The request for tenders sets down that workers will automatically be signed up to a default investment strategy based on their age.
Those who are within five years of the State pension age will be allocated to a low-risk fund while those with between five and 15 years to go to the State pension will be placed in a medium-risk fund.
The default for all other younger workers will be the higher-risk option. However, all workers will have the option of switching to a different strategy after enrolment.
The investment managers will not have access to individual savers' details or funds. Instead, funds from the overall pool of contributions will be allocated equally among investment managers at each risk level.
As the money is pooled by the scheme administrator – the National Automatic Enrolment Retirement Savings Authority (Naesra) – all auto-enrolment members at each risk level will receive the same return on their investments: it will not depend on which of the three managers their funds are invested with.
