Proposals by the Government for an auto-enrolment pension scheme will leave women worse off and “widen the pensions gender gap”, an Oireachtas committee will be warned today.

The scheme is designed to tackle Ireland’s severely low pension coverage rates, with only one in three private sector workers signed up to a retirement savings scheme.

Under the proposals, for every €3 saved by a worker, the Government will add another €1 – with employers also matching contributions of up to 6% of an employee’s salary.

But pensions company Irish Life is set to raise serious concerns over the removal of an option for individuals to make “voluntary contributions” to the scheme, warning it will widen pension inequality and “embeds this discrimination for generations to come.”

The option was part of the Government’s initial vision for the scheme, published in 2018, but has since been removed.

In its opening statement to the Oireachtas Social Protection Committee today, seen by BusinessPLus.ie, Irish Life will warn this will “have worse outcomes for women”.

They will argue that changes from the initial ‘strawman’ model the Government published in 2018 will “widen the pensions gender gap”.

“The inability to increase pensions contributions will put women in the auto-enrolment scheme in a worse position to those within existing occupational pension schemes and will widen the pensions gender gap,” the committee will be told. The pensions provider will also say that the ‘inflexibility’ means the scheme will “actually stop members who might want to increase their savings”, or who might have periods out of work or long-term illness from “ever increasing their pension pots”.

Women in Ireland already face a “multitude of obstacles” to reach pension parity with men, they will tell the committee.

“The State should not be implementing a system which embeds this discrimination for generations to come and removes any chances of improvement.”

Under the plans announced last year by Social Protection Minister Heather Humphreys, after ten years of employment a worker will have put the equivalent of 14% of their salary into the scheme per annum, with no options to increase that figure or put in a top-up amount.

This will be made up of 6% of a person’s salary, a 6% contribution from an employer and 2% from the Government.

There will not be flexibility to contribute at other percentages of salary rates. Employees will initially be putting 3.5% in year one of the scheme, with that figure gradually increasing to the maximum of 14%.

It was originally proposed that a person would be allowed to make ‘voluntary contributions’ in excess of the minimum which may be “matched by the State on a pro-rata basis subject to a prevailing limit”.

When the Government published its final plans for the system last year, the Department of Social Protection said options for ‘future phases’ could include an “examination of introducing additional voluntary contributions over the minimum specified in law”.

Research published by the ESRI in 2019 found that the average total weekly pension income in 2010 was €280 for women and €433 for men.

A separate report from Irish Life in 2019 showed that women in Ireland could see pension pots of €120,000 less than men.

European studies suggest that men spend seven more years in paid employment than women, while women are three times more likely to reduce hours/work part-time than men.

Eoin McGee, the author of How To Make Your Money Work, and a financial planner, said: “Women, in particular, or women who are out of the workforce for whatever reasons, whether through illness or traditionally through children, they have no way of catching up because the rates are capped at 6% from you and your employer and 2% from the Government and you can’t go above that in auto-enrolment.”

Mr McGee said that the Government would make the case that these women would be better off as they were now getting a pension, compared to not having one previously. However, he said for those people who take part in the auto-enrolment scheme it had the ‘absolute potential’ for them to fall further behind.

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