Credit unions have called for the government to raise awareness and understanding of the pension auto-enrolment (AE) scheme that is due to come into effect later this year, with recent figures showing that less than a fifth of people who will be eligible for the scheme are aware of it.
The Credit Union Development Association (CUDA), which works with 50 credit unions nationwide, wants a State-funded mechanism whereby people can avail of free education and advice on auto-enrolment and their possible choices around it.
CUDA proposes that credit unions could provide such guidance, and without a concerted effort to raise awareness, the group believes that the 750,000 set to be signed up to the scheme will view it as an unwelcome and unaffordable tax.
"Such a mechanism would be instrumental in explaining how employer and State contributions will significantly reduce the cost to workers of contributing to the scheme, which CUDA CEO Kevin Johnson said would be "the biggest pension shake-up in the history of the State."
Under auto-enrolment, workers who do not have an occupational pension will be automatically enrolled in a new retirement savings scheme if they’re aged 23 to 60.
The employer and the State will also contribute to the retirement savings scheme on their behalf.
Employees will be able to leave the system or pause their contributions under certain circumstances but will be automatically re-enrolled after two years if they are still eligible.
Figures produced by the Central Statistics Office (CSO) last month show that four in 10 workers that don't have pension cover said they can't afford to save for one.
For nearly six in 10 workers with no pension coverage, the State pension was cited as the expected main source of income in retirement.
Johnson said that auto-enrolment could become a reality for 750,000 workers in the second half of 2024, and that it is "incredibly worrying" that most people eligible for the scheme are not aware of it.
"A failure to significantly boost awareness and understanding of the scheme will likely lead to unnecessary concern amongst those 750,000 workers – and furthermore, could also hamper its success," he added.
“A government-funded mechanism such as this would ensure that affordability would not be a barrier for those who wish to get the important information and guidance they need before they are signed up to AE. Furthermore, given this is a semi-compulsory government-led initiative, it would be important that such free advice is offered.
"Credit unions would be well placed to provide such guidance and advice if such a mechanism were put in place. Given credit unions have consistently proved to be Ireland’s most trusted organisations and topped the league tables for customer experience, we believe their role in the provision of such guidance would substantially boost public acceptance of and comfort with AE."
Johnson brought up the Abhaile scheme for homeowners in mortgage arrears who can avail of financial advice from an accountant paid for by the State, capped at €250.
An accountant will work with the individual to confirm if an alternative repayment arrangement (ARA) will suit the homeowner’s individual situation.
Johnson further stated that there are merits to the semi-compulsory nature of the AE scheme in that it makes it much easier for workers to sign up for a pension as all the arrangements will be put in place to do so.
"However, the semi-compulsory nature of the scheme could also spark alarm and annoyance amongst workers, particularly those on low wages or who don’t understand the scheme or indeed pensions," he continued.
"A strong public education and awareness campaign – backed up by a mechanism whereby State-funded advice would be available – would however reduce potential public disquiet around the scheme and improve its chances of success."
(Pic: Getty Images)
