Minister Humphreys' closing speech in the Second Reading of the AE Bill in the Dáil

[Duke of Marmalade]

Deputy Connolly mentioned the alternative AE proposal that came forward. I arranged an in-depth consideration of this proposal. My officials and the independent body, the Pensions Council, looked closely at it. I know the proposal sounds great. It would supposedly double the investment returns for automatic enrolment participants. Who, of course, would not want that? However, the fact is there are many unanswered questions about whether the proposal could work in practice. The Pensions Council is an independent body of experts who are drawn from the legal and financial world. Its role is to advise me on what it understands to be the best way forward to provide a pensions landscape in Ireland that works best for the consumer. While the council acknowledged that it is an interesting idea, it ultimately could not recommend it to me as a better alternative to the auto-enrolment design that had already been agreed. The council found several shortcomings with regard to the technical and practical feasibility of the proposal, as well as a lack of supporting evidence for it. I do not think it would allow the same degree of flexibility we are trying to build into this scheme.

I, as Minister, cannot foist an untested and unproven theory on automatic enrolment participants. I cannot and should not be taking risks with people's money with an unproven approach and against the advice of the Pensions Council. Even if the alternative proposal were to be risk-free - and is there such a thing as risk-free? - it would allow no flexibility whatsoever for participants. It would lock them into permanent participation with no option to suspend or opt out. I could not recommend that particular approach to the House.

 

[Duke of Marmalade]

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[Duke of Marmalade]

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[Duke of Marmalade]

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[Duke of Marmalade]

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[Brendan Burgess]

Hi Duke

One of my major reservations about Colm's system was the lack of flexibility. That people could not put in more or take payment breaks.

So I am clearly making the same mistake as the Minister. And believe me, there is nothing sinister in my mistake and I doubt it in her mistake either.

Brendan

 

[Duke of Marmalade]

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[Brendan Burgess]

Opt out - available in both cases (fake news from Minister)
Suspend contributions - available in both cases (fake news from Minister)

It's a while since I looked at it but I got the impression or remember it that Colm's system was much more rigid. If it were not, then people could opt out while the market price was below the unit price and pile in when the unit price was below the market price.

It's not helpful to call my mistake "fake news" or "a tad sinister".

It is not easy to persuade people at the best of times, but if you abuse them, then you just make your case more difficult.

Brendan

 

[Colm Fagan]

It's a while since I looked at it but I got the impression or remember it that Colm's system was much more rigid. If it were not, then people could opt out while the market price was below the unit price and pile in when the unit price was below the market price.

Brendan, you're right that it would be bad for my proposal's stability if people kept opting in or out depending on whether smoothed value was more or less than market value, but you must remember that they would be cutting off their nose to spite their face if they opted out when smoothed value (SV) exceeded market value (MV).
Suppose that, in Month X, SV is 120% of MV. If the contributor opts out for that month, they lose the matching contribution from the employer and the state's contribution. So, by not contributing €3 in order to save themselves €0.60, they lose another €3 from the employer and €1 from the state. That's the key reason why they'll keep taking the XXXXXXXXXXXXXXXXXXXX if SV>MV.
When the opposite is the case, i.e., SV<MV, you're right that they will not be allowed to pile in. Contributions are a specified percentage of earnings (3% or whatever) up to 80k a year. They can't pay more than that percentage. If workers want to make AVC's, there's plenty of insurance companies out there glad to take their contributions. I think that's a small price to pay (if you really consider it a price) for getting double the value for money.
PS: Something very strange is happening with this post. It looks OK when I'm drafting it, but when I say "save", what appears is a load of XXXXX's where I've written that "they'll keep taking the XXXXXXXXXXXXXXXXXXXX if SV>MV". Strange
PPS: Even stranger. I still can't write "taking the p i l l s" and stop it coming out as a load of XX's!!

 

[Brendan Burgess]

PS: Something very strange is happening with this post. It looks OK when I'm drafting it, but when I say "save", what appears is a load of XXXXX's where I've written that "they'll keep taking the XXXXXXXXXXXXXXXXXXXX if SV>MV". Strange

Very sinsister.

Maybe Heather Humphreys has hacked Askaboutmoney?

Brendan

 

[Flybytheseat]

Very sinsister.

Maybe Heather Humphreys has hacked Askaboutmoney?

Brendan

Piss off Brendan - Do you really think so ?

 

[TheJackal]

So that's that then? Fast foward 5 years when the fund is in massive liability and they review where it went wrong and alternatives

 

[Bronte]

Hi Duke

One of my major reservations about Colm's system was the lack of flexibility. That people could not put in more or take payment breaks.

So I am clearly making the same mistake as the Minister. And believe me, there is nothing sinister in my mistake and I doubt it in her mistake either.

Brendan

This thread is very hard to follow. What is Colm's system?

 

[Duke of Marmalade]

The Minister did an encore of OP in her closing reply to the Seanad yesterday (covered in a separate thread).
And I mean it was a repeat except for the addition of an extra verse of which more later.
But first one notes that she repeated the following untruths:
Even if the alternative proposal were to be risk-free - and is there such a thing as risk-free? - it would allow no flexibility whatsoever for participants. It would lock them into permanent participation with no option to suspend or opt out.
Entirely false, not even a wee bit true. Now, as befits my station, I would never accuse a Minister of nefarious activity so I take it that the fact that she ignored the correction which I presume was sent to her by Colm was because her "protectors", who are most likely the ones responsible for the untruth in the first place, kept it from her.
The second untruth is as follows:
The Pensions Council is an independent body of experts
Again I think Colm has pointed out that the PC is stuffed with public servants and indeed employees in her own department. Maybe she had some weasel technical justification for saying the PC was independent, I presumed. But no. Michael McDowell, possibly the most respected legal mind in the country, questioned the independence of the PC in the Seanad yesterday. This time the Minister can't blame her protectors for in her reply to McD she repeated that the PC was independent. Ok she was on autopilot and just regurgitating what she had been fed by her advisors for her Dail speech, which really almost smacks of contempt for the Seanad.
As for the extra verse which concerned a throwback to their former smash hit, the SSIA, that deserves a separate thread.

 

[Colm Fagan]

This thread is very hard to follow. What is Colm's system?

Hi Bronte
Probably this presentation is the most straightforward explanation. There's lots more on my website colmfagan.ie
The Bill before the Oireachtas treats AE exactly the same as a normal DC pension. There is a "default" approach where members are put into high-risk unit-linked funds at the start, then moved gradually to lower-risk funds as they get older. When they retire, the scheme pays out a lump sum. If they want to use that lump sum to provide a pension for life, they have to buy an ARF or an annuity from an insurance company or other financial services provider.
My proposal looks at the scheme as a whole. Members' individual accounts look like - and are administered like - high interest deposit accounts earning an average interest rate of c4% a year more than bank deposits. During a person's working years, contributions are added to the account, then they gradually draw from it in retirement to provide a pension. There is a special Longevity Protection Fund to protect retired members from running out of money if they live too long.
The Pension Council's own independent expert estimated that pensions under my proposal would be more than double those under the Bill, but the Pensions Council advised the Minister to reject it, a recommendation she accepted. That's what all the fuss is about!!!

 

[Brendan Burgess]

Even if the alternative proposal were to be risk-free - and is there such a thing as risk-free? - it would allow no flexibility whatsoever for participants. It would lock them into permanent participation with no option to suspend or opt out.
Entirely false, not even a wee bit true. Now, as befits my station, I would never accuse a Minister of nefarious activity so I take it that the fact that she ignored the correction which I presume was sent to her by Colm was because her "protectors", who are most likely the ones responsible for the untruth in the first place, kept it from her.

Hi Duke

I think that I have pointed out before that I certainly got the same impression as the Minister. That allowing flexibility in Colm's system would allow people to game the system. Putting more in when the buy in price was lower than the market value.

Don't forget that the Minister is dealing with hundreds of issues simultaneously. She does not have the time to study and remember the detail of a very complex proposal.

So you are right not to accuse her of nefarious activity.

Brendan

 

[Duke of Marmalade]

Hi Duke

Don't forget that the Minister is dealing with hundreds of issues simultaneously. She does not have the time to study and remember the detail of a very complex proposal.

Ah Boss! Once was maybe careless. Twice?!
I think she herself or one of her FG colleagues described this as the most important piece of legislation since Adam, so maybe she should have given it a bit more consideration than she gives to the hundreds of other issues you refer to, rather than, as you put it, act on "impressions".
Look, and I mean this in no disrespect, of course the Minister is way out of her depth on a technical matter such as this, as portrayed by her bizarre foray into the SSIA example (which I now suspect was a solo run). So while she is accountable and her job will be on the line soon in front of her employers - the electorate (I hope she gets their support as she has in general been very good), it is the untouchables in her department who are really to blame for this massive deception.
It is normal governance for the opening of Board meetings for the chairman to ask that members declare conflicts of interest or else formally record that there are none. Moreover when a particular item comes up for discussion it is obligatory for individual directors to declare a conflict, if such exists, and excuse themselves from the room and the subsequent vote. There is no evidence that the PC followed this norm of governance (not saying they broke any formal rules).
The DSP member in particular would have found it impossible to go against the DSP proposal, given the considerable history to this debate; this despite the overwhelming support for the proposal from the truly independent expert that the PC themselves appointed.
I am sure that if that expert had rejected his proposal Colm would have thrown in the towel.

 

[Bronte]

The Bill before the Oireachtas treats AE exactly the same as a normal DC pension.

My husband had a defined benefit pension. His company, which is American but also Irish based tried to move everybody like him into a defined contribution. He got the very slick hard sell. Loads of glossy presentations that would persuade you black was white. I was not allowed to attend. There was no way he was every going to change from a DB to a DC. Nobody in his company, nor the slick marketing people ever said that a DB is better than a DC. I trust no pension company. Generally am untrustworthy.

Just setting out the stall as a lay person.

I think AE is a good idea, that everyone contributes and gets a pension at the end. Of concern

- costs
- guaranteed final pensions
- fund managers taking too much in commission
- funds taking too much risk
- funds going bust
- nobody being actually accountable
- another quango to manage it
- state backed guarantees
- the possibility that if you have AE you won't get the state pension
- being told everything is great and down the line finding out otherwise

I'd also like a simple explanation. Perhaps because it's no longer of concern to us I'm not following this properly. I don't see anything in the newspapers.

 

[Bronte]

Don't forget that the Minister is dealing with hundreds of issues simultaneously. She does not have the time to study and remember the detail of a very complex proposal.

This is pretty worrying, that the minister in charge of this is not on top of her brief. In relation to an absolutely massive undertaking that affects every worker in the country. If she's incapable of not having time to study it or remember the detail than she should not discuss it and defer to someone in her department who can.

 

[Duke of Marmalade]

I'd also like a simple explanation. Perhaps because it's no longer of concern to us I'm not following this properly. I don't see anything in the newspapers.

I have just noticed that Colm gave a simple explanation in post #15, so I am deleting this superfluous effort.