Credit unions bid to rescue Government’s pension plans by filling information gap around the shake-up

The locally-owned lenders are offering to get the message out about the State’s plans for a new mandatory pension scheme.

Some 750,000 workers are due to be signed up to the auto-enrolment scheme later this year.

But recent research conducted by the Central Statistics Office found that just one in five of those with no occupational pension from their current employment are aware of the planned auto-­enrolment retirement savings scheme.

Now, the Credit Union Development Association (CUDA), which represents 50 credit unions across the country, is advocating that a government-funded mechanism be put in place where those eligible for auto-enrolment can get free guidance and advice on the scheme so they better understand how it will work.

CUDA is proposing that credit unions could provide this guidance for a small fee.

Head of CUDA Kevin Johnson said the Government must act now to address the huge public awareness gap on auto-enrolment, where four in five eligible workers are unaware of the scheme.

He called for a state-funded mechanism where credit unions would provide free education and advice to the 750,000 workers set to be signed up for the new scheme.

He said that with almost six in 10 workers without pension coverage expecting to rely on the state pension in retirement, the Government cannot afford for the new auto-enrolment pension to fail.

There was a fear if people were not properly informed about the new scheme that they will just see it as an unwelcome new and unaffordable tax, he said.

Information sessions could explain how employer and state contributions to the new pension will reduce the cost to workers of contributing to the scheme.

Mr Johnson said: “In recent months, the Government has reiterated its commitment to having auto-enrolment up and running by the second half of 2024.

“This means that for 750,000 workers, auto-enrolment could become a reality within less than six months.

“In light of this timeframe, it is incredibly worrying that recent research has found that most of those eligible for auto-enrolment are not aware of it.”

He said a failure to boost awareness and understanding of the scheme will likely lead to unnecessary concern among those 750,000 workers and could also hamper its success.

Mr Johnson said affordability is an issue for many workers when it comes to pensions, with four in 10 of those without pension cover saying they can’t afford to save into one.

“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 auto-enrolment.”

The boss of the credit union body said that auto-enrolment is a semi-compulsory Government-led initiative, which meant it is important that such free advice is offered.

Workers and their employers will each initially pay 1.5pc of a person’s gross salary into the scheme.

From year four, this will increase to 3pc, rising to 4.5pc in year seven and 6pc from year 10.

For every €3 a worker pays in, their employer would pay the same, and the State would top this up by €1.