Sir, – The Department of Social Protection is now proposing a flat fee to administer workers’ auto-enrolment pensions (“Search for auto-enrolment asset managers to start within weeks”, Your Money, November 25th), a complete reversal of its original plan to charge a percentage of funds under management. It means that the administration fee for someone with €20 in their account will be the same as for one with €2,000. Under the original plan, the charge for the smaller pot would be one-hundredth of that for the bigger one.
This regressive proposal will be a disaster for low-paid and temporary workers, who are supposedly the main beneficiaries of auto-enrolment: charges for low-paid workers who have ceased contributions could exceed amounts in the accounts, wiping them out completely.
It is ironic that the same department prohibits commercial PRSA providers from charging a cash fee, because of its negative impact on small pots. It is also ironic that its UK counterpart (DWP) wants “to protect individuals who are automatically enrolled . . . from high and unfair charges and limit the risk of erosion of their pension savings from such fees”. The Department of Social Protection here seems intent on doing the opposite.
We are now supposedly just 10 months from the scheme’s launch date, yet this is the first indication we’ve got of how fees will be structured. There’s still no indication of their amount. It typifies the chaos that has bedevilled auto-enrolment from the start. It is one of the costliest projects in the history of the State – contributions from employers, employees and the state are projected to increase to €4.2 billion a year in current money terms when the scheme is mature (plus overruns on administration costs) – yet this massive undertaking has been embarked on without a comprehensive cost-benefit analysis ever being completed. It’s quite incredible.
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We still have time to reconsider. The next government, of whatever hue, must recognise the folly of trying to implement such a massive undertaking without adequate planning. It must press the pause button and ask the ESRI to complete a root-and-branch review. – Yours, etc,
COLM FAGAN,
(Past President,
Society of Actuaries in Ireland),
Bray,
Co Wicklow.