I am more interested in the statement from Finance:
"The focus of our policy input will be to be supportive while minimising the cost and operational risk for the State arising from the establishment of the Central Processing Authority (CPA)"
Finance are obviously worried that the CPA could be a complete mess, operationally and financially. They're right to be worried.
To see how it could be a financial mess, look across the water. NEST (National Employment Savings Trust) is up and running for over a decade and is widely seen as a success. Yet NEST had a cumulative deficit of over £800 million as at 31 March 2022, despite boasting over 11 million members. They project to finally clear the deficit by 2038. The Irish government is modelling its auto-enrolment scheme on NEST. It is also proposing the same charge (0.5% of assets under management), but it will lack NEST's economies of scale - probably less than a tenth of its membership. So how can they ever hope to break even? Fund charges will need to be much higher than the 0,.5% indicated by DSP (but not written in stone in the Draft Bill, mind you). To give an idea of the scale of the challenge, I (generously) estimate fee income of €140,000 in year 1. What will costs be in year 1, set-up and running? Any advance on €50 million, any advance on €100 million?
To see how it could be an operational mess, look again at NEST. It has over 40 default funds (for different future retirement dates). The Irish scheme will also have three risk-rated funds. Each will have to be valued daily and units allocated to/ deallocated from individual members' accounts at prices ruling on those dates. There will be a wide variety of payroll systems for the host of smaller employers participating in the scheme, making it well nigh impossible to ensure that contributions will be allocated to the right funds at prices ruling on the dates contributions are paid. The CEO of a leading provider of IT services to this market told me recently that government hasn't a hope of persuading a reputable outsourcing company even to quote for the job.
Contrast that with the smoothed equity approach as explained
here. There will be just one fund for everyone. "Interest rates" will be calculated once a quarter rather than daily. Crediting "interest" to members' accounts will be a cinch, just like to a bank or credit union account. The running cost will be a fraction of the cost of running a scheme designed on the lines proposed by government. Also, members will remain in the scheme post-retirement, when account values are at their highest. The half percent's will keep rolling in, so it will be no problem to keep running costs well under 0.5% a year in the longer term.