Thought Leadership

First mooted in 2006, automatic enrolment into a new workplace private pension scheme (auto-enrolment) looks set to be finally introduced in Ireland for private sector workers following an announcement at the end of March 2022 by Minister Heather Humphreys of plans to enrol an estimated 750,000 people in 2024. Auto-enrolment, hailed by the Minister as a “once in a generation policy”, has worked well in other countries such the UK, New Zealand and Australia. Much of the focus in Ireland to date has been on reducing future spending on pensions rather incentives to increase private pension coverage. This is not surprising given that the State Pension is the single biggest cost to the State in terms of benefits. €6 billion was spent on the State Pension in 2020, far exceeding the €4.5 billion spent on the Covid-19 Employment Wage Subsidy Scheme in the same year. It is widely recognised that Ireland urgently needs to change its culture around saving for retirement and, with changing demographics, pressure on the State to continue to fund the State Pension will only grow unless private pension coverage is increased. In 2021, the Central Statistics Office (CSO) reported that 34% of Irish workers have no pension provision other than the State Pension. Life expectancy in Ireland is currently 90 years for men and 92.6 years for women, which means that workers, on average, will be retired for more than a quarter of their lives, with one third of the population depending solely on the State to fund their later years. While the current annual State Pension of circa €13,000 might seem reasonable if you have paid off your mortgage, Ireland’s home ownership rate in 2021 was reported to be 68.7%, meaning that people many will still be paying high rents in retirement long after their peers own their own homes. With average annual rents in excess of €15,000, according to the Residential Tenancy Board’s 2021 rent index, sole reliance on the State Pension will not be sustainable. As inflation drives household running costs to new highs, it is understandable that the option of saving for retirement is the easy one to overlook. Depending on contribution levels, auto-enrolment presents an opportunity to plan more adequately for retirement. Before auto-enrolment starting a pension required a worker deciding to do so. After auto-enrolment, if the same worker does nothing, a portion of their pay will automatically go into the new workplace pension scheme, with an option to opt out. The system relies on behavioural inertia, trusting that many people will not opt out and will stay invested. This has been the experience elsewhere. A study carried out for Department of Work and Pensions in the UK looked at 50 employers across the public and private sector and identified the opt out rate at just 9%. Applying this rate to the numbers targeted for new scheme in Ireland could result in 682,500 additional private pensions for Irish workers. Expectations of final pension fund values will need to be carefully managed as starting contribution levels of 1.5% by both employer and worker are relatively low. A single person on the average industrial wage of €40,000 can expect to pay €600 into the pension scheme each year. The employer will pay the same and the State will pay €200. While auto-enrolment will inevitably increase private pension coverage, it cannot be implemented overnight. January 2024 has been identified as the starting date, but there are a lot of hurdles to overcome in advance of this date, including legislation and the establishment of a Central Processing Authority to oversee the scheme. Employers and payroll service providers will need sufficient time and guidance to ensure they can roll out the new pension system once the necessary legislation is in place. Payroll service providers have indicated that this project will take approximately 18 months once full guidance is received, meaning there will be a long lead time involved in building the system. Given Ireland’s demographics, it is important these plans are not further delayed as the pension problem is only growing. Minister Humphreys has provided assurances that the State Pension will remain the bedrock for retirees, despite much debate in recent time as to how this will be funded and at what age received. Nevertheless, to reduce the reliance on the State Pension, people need to be incentivised to start saving for their pensions while they are earning. The new auto-enrolment system, if rolled out without delay, might just be what is needed to ensure that people can enjoy their retirement. Miriam Donald, Public Policy Manager, Chartered Accountants Ireland.

“A fox knows many things, but a hedgehog knows one big thing.” There are several dimensions to how organisations and teams can be diverse 1 and ways in which diversity can strengthen the problem-solving and creativity of teams and organisations. Here the focus is on the difference between generalists and specialists. It is perhaps accepted wisdom that you need to be a specialist to succeed; to identify a niche or narrow field of knowledge and become a recognised expert. In his book, Range: How Generalists Triumph in a Specialized World (2020), David Epstein argues that while specialists are clearly necessary, particularly in technical contexts, there is also an important role for generalists in a world that is “unkind” or “wicked” in the sense of being unpredictable, subject to rapid and continual change. Specialists thrive where boundaries are clearly defined, and repeated experience is beneficial. Epstein gives the examples of chess masters and firefighters, whose domains, though challenging, are “kind” learning environments in the sense that patterns of events repeat and are predictable. We rely on specialists every day to get it right, to provide accurate advice, to make the correct decision, but when it comes to “wicked” domains, where the rules are not established, specialists may be at a disadvantage. Generalists know relatively little about a lot, have a broad range of skills and experience. They tend to be curious and can transfer their knowledge and experience between disciplines, applying concepts from one domain to solve a problem in another, unrelated field. Generalists can see problems in the abstract, releasing them from their conventional, contextual straitjackets. Making (unexpected) connections through analogical thinking is the secret to the generalist’s power to solve problems. Introducing ideas from non-related contexts, outside of the team’s comfort zone, will help it come up with better answers in an unpredictable world. Isaiah Berlin’s influential 1953 essay on Tolstoy’s view of history, “The Hedgehog and the Fox”, was inspired by a fragment from the Greek poet Archilochus, “A fox knows many things, but a hedgehog knows one big thing”. Berlin speculates that, taken figuratively, these “words can be made to yield a sense in which they mark one of the deepest differences which divide writers and thinkers, and, it may be, human beings in general”. In his 20-year study of the accuracy of the geopolitical forecasts of almost 300 experts, psychologist Philip Tetlock drew on Berlin’s essay, distinguishing between two types or sub-groups: ‘hedgehogs’, who know one big thing, and ‘foxes’, who know many little things and integrate them. Tetlock found it was the foxes who are more likely to be correct in their predictions, although as Daniel Kahneman points out in Thinking Fast and Slow (2012), these predictions were still largely inaccurate (it is a challenging thing to predict the future). Kahneman elaborates on the distinction of types. As a hedgehog “acquires more knowledge, they develop an enhanced illusion of their skill and become unrealistically overconfident”. Accounting for events within a coherent framework, they are “especially reluctant to admit error”. In contrast, ‘foxes’ “recognise that reality emerges from the interactions of many different agents and forces”. Hedgehogs (by analogy, specialists) do one thing very well, and tend to want to bend reality to fit their experience and hard-won expertise. Foxes (generalists) have a broader understanding of multiple disciplines, tend to be more curious, more open to ambiguity and ready to listen to counterarguments. Faced with the uncertainty of today’s wicked world, it is important that teams, particularly those working in technical contexts, have a mix of hedgehogs and foxes, specialists and generalists. Innovation and problem-solving happen when teams include individuals with diverse backgrounds, bringing wider perspectives, from within and outside the norm. Diverse teams can apply the vertical thinking of their specialists, working within the detail of the core technical framework to address more familiar problems, while availing of the lateral thinking of their generalists for the unexpected. Working with technical teams, generalists tend to be ‘outsiders’ in that they are not initiates in the core discipline(s). However, as Epstein argues, generalists can have the “outsider advantage”, bringing new perspectives and techniques to what seem intractable problems to insiders. Insider hedgehogs tend to focus on what they already know within their discipline, industry, or profession, being invested in their specialist knowledge and attached to tools and techniques with which they are comfortable and familiar. When teams are faced with unfamiliar problems, such attachments can lead to disaster. For example, the Space Shuttle Challenger Disaster in 1986, in which the lives of all seven crewmembers were lost, discussed by Epstein in a chapter titled “Learning to Drop Your Familiar Tools”. Challenger disintegrated 73 seconds after launch due to a damaged ‘O-ring seal’ in one of its solid rocket boosters which failed to contain pressurised burning gas. Engineers from a contractor company outside of the NASA organisation had spotted an unfamiliar problem with the O-ring seals and asked NASA to postpone the launch based on their qualitative opinion. However, NASA refused the request because the outside engineers could not quantify their opinion – it did not fit with the quantitative tools and techniques of NASA’s established culture. Faced with an unfamiliar situation, rather than adapting, the NASA team behaved like a collective hedgehog and tried to bend the problem to the one they had experienced before. To deal with the unexpected and unpredictable, to drop familiar tools when necessary and adopt new approaches, while also excelling at the core purpose of the organisation, its ‘business as usual’, teams need specialists and generalists, insiders and outsiders, hedgehogs and foxes. And while congruence has been the hallmark of effective organisations, where all are aligned with vision, goals and leadership, a level of incongruence, of ambiguity, is also healthy to counter the less beneficial effects of conformity, such as ‘groupthink’, or applying old tools to new problems, failing to adapt. An effective problem-solving culture balances standard practice with different perspectives, knowledge and experiences. Diverse teams of specialists and generalists (or of individuals who can combine and balance these traits) will expand the range of organisations to cope with today’s wicked world. Michael Diviney Executive Head of Thought Leadership 1. According to Lee Gardenswartz and Anita Rowe in Diverse Teams at Work: Capitalizing on the Power of Diversity (2nd ed., 2003) there are four dimensions or layers to the diversity of people within an organisation: organisational, external, internal and personality. The specialist/generalist axis is part of the external dimension. ↩

This article summarises Chartered Accountants Ireland’s response in March 2022 to the Irish Government’s Consultation on the Digital Connectivity Strategy, which is a sub-strategy of the national strategy, Harnessing Digital – The Digital Ireland Framework, launched in February 2022. The Digital Connectivity Strategy is primarily focused on enabling the delivery of the digital infrastructure dimension, setting out the ambition level and the strategic enablers and initiatives needed to ensure the ambition is met. It seeks to position Ireland as a digital leader, driving and enabling digital transformation across the economy and society. The consultation asked for input from interested parties in relation to six specific questions. We responded to three of these questions, engaging with the Institute’s Technology Committee to ensure that responses are in line with the views of our members working in this area. In our introduction, while we recognise Ireland’s ranking as 5th among EU Member States in the Digital Economy and Society Index (DESI), we believe our digital plans need to be even more ambitious to promote ‘Ireland Inc’ and support our ability to attract foreign direct investment (FDI). We also note how the hybrid working model’s success will depend on the availability of reliable broadband and enhanced digital training of the workforce. The pandemic has highlighted issues in rural areas and the digital divides that exist between different groups and sectors. We need to ensure that every citizen living in Ireland has access to the internet via high-speed broadband, which will substantially increase Ireland’s standing on a global stage and bring economic benefits. Addressing the first consultation question in relation to the ambition level of the strategy, we suggest that the level be even higher and note our concern that the National Broadband Plan is already falling behind schedule. We also recognise that a shift to 6G technology will immediately be upon us when we reach the 5G 2030 goals. We suggest that this strategy is reviewed and updated every two years to ensure that it evolves quickly enough to keep pace with change. A whole of Government approach is needed and we suggest creating a separate portal on gov.ie, presenting all sub-strategies in one place, which could be used to communicate progress to stakeholders of all sub-strategies as well as the overall strategy. We welcome the strategy’s recognition of the need to facilitate and promote research and innovation in the sector, which we see as key to achieving the desired outcomes of the strategy. The second consultation we address asks how Ireland can ensure it has a sufficiently skilled workforce and the State’s role in developing this area. We recognise the talent shortage Ireland is experiencing and that a dynamic thought process is needed by the Government to ensure that people with the right skills will be available to implement its digital transformation plans. Salaries for senior cybersecurity jobs in the public sector will need to be reviewed to ensure the right calibre of candidates are attracted. Standard applications in the Critical Skills Occupation List category currently take circa 17 weeks to process; we welcome any progress that can be made in shortening processing times. The State has a leadership role to play in educating our population to support the improvement of digital skills. According to the DESI, although Ireland performs above the EU average in advanced digital skills (for example, for the indicators on ICT graduates and ICT specialists), the basic digital skills of the population are lower than the EU average (53% against 56%). It is important that Ireland continues to focus its efforts on improving the basic digital and software skills to ensure that the workforce is equipped to undertake current and future roles. We recommend that efforts are made at the primary and secondary school level to equip children and young people with the skills needed to do the jobs of the future. We welcome the €50 million funding announced in December 2021 for schools to address the digital divide, funded under the EU’s Recovery and Resilience Facility. We recognise the importance of the Science, Technology, Engineering and Mathematics (STEM) disciplines and encourage a strong focus in terms of attracting students to take on these subjects. Coding and cybersecurity should be built into school curricula. Ongoing, long-term initiatives aimed at upskilling and reskilling in higher education are also required in addition to initiatives like Springboard+, Adult Literacy for Life, and those from Science Foundation Ireland, Enterprise Ireland and Solas. There may also be scope to develop specific training programmes (similar to the Assured Skills Programme in Northern Ireland) in cybersecurity with large technology companies, which would gain from the engagement with potential employees, good publicity and the wider development of relevant skills in the workforce. The final question addressed in our consultation relates to general observations. We identify cybersecurity and data protection as key areas that require adequate resourcing. As trust is especially important for attracting FDI, we need to ensure that we continuously enhance skills in these areas and communicate our progress. We have a particular interest in sustainability and with the net zero goal for 2050 in mind, we believe that the Irish Government will need to do more than just “conduct analysis into positive and negative impacts of digital technological changes on sustainability” as stated in the strategy. All aspects of the strategy will need to be rolled out in a carbon neutral way. In our conclusion, we recognise that the Digital Connectivity Strategy is a key driver for the future of Ireland’s connectivity and competitiveness and essential for hybrid working practices. Inadequate broadband capacity will undermine the ability of regionally located businesses to compete nationally and internationally and will prevent people living in rural areas from working remotely. Improved broadband infrastructure will enable rural-based businesses to create employment in their local communities, as well as supporting the transition to sustainable and circular economies. Education and research are key; labour shortages and ever-evolving technological advances create big challenges but also opportunities for the strategy’s success. The area of cybersecurity is of particular concern, considering the developing sophistication of cyberattacks and the importance of trust for the Irish economy. We welcome all progress in the strategy’s goals and suggest continuous engagement with all parties responsible for implementation to ensure delays are identified and a path back to the plan is developed. The full response is available on our website.