If you’re an employer in Ireland, from 2024 you will have a legal obligation to automatically enrol eligible employees into the new auto-enrolment pension scheme if the employee is not already in an existing pension scheme.
This process is known as pension auto-enrolment, and it’s designed to help workers save for their retirement.
The auto enrolment pension scheme is been rolled out over 10 years. With employer and employee contributions increasing every 3 years. Employees and employers must meet the minimum contributions.
Ireland is the only OECD country that doesn’t yet operate an Auto Enrolment or similar system as a means of promoting pension savings. The new system is designed to simplify the pensions decision for workers and make it easier for employers to offer a workplace pension.
Jump To Section:
- Why is Ireland Starting Auto-enrolment Pensions?
- What is Pension Auto Enrolment?
- Who is Eligible for Auto Enrolment?
- Who is Not Eligible for Auto Enrolment
- Auto Enrolment Options for Employees
- Auto Enrolment Contributions
- What are the Employer’s Responsibilities?
- Choosing a Pension Scheme
- Can Companies use private pension scheme & Auto-Enrolment?
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Why Is Ireland Starting Auto-enrolment Pensions
- Currently, there are over 750,000 workers in Ireland without pension savings.
- These workers may only have the state pension to retire on (€265 per week).
- People are living longer, which means their retirement funds need to last longer.
In this guide, we’ll cover everything you need to know about pension auto-enrolment, including who is eligible and what your responsibilities are as an employer.
What is Pension Auto Enrolment?
Pension Auto Enrolment is a government initiative that requires employers to automatically enrol eligible employees into a new auto-enrolment pension scheme if they are not already in a pension scheme.
The scheme was announced in October 2022. The plan is due to launch at the end of 2023 with the first payments due to be processed through the new system in 2024.
This means that employers must be ready to make contributions for employees and make contributions to it on their behalf by the start of 2024.
Who is Eligible for Auto Enrolment?
All employees who are aged between 23 to 60 years old, earn at least €20,000 (gross) per year, and work in the Republic of Ireland are eligible for auto-enrolment. This includes full-time, part-time, temporary, and agency workers.
- Employees earning €20,000+ (Gross)
- The maximum salary used to calculate contributions is €80,000.
- Workers Aged 23 to 60
- If employees are not already in a pension scheme they will be automatically enrolled.
Who is not Eligible for Auto Enrolment?
- Self-employed people.
- Employees who already have a pension in place or are part of a company pension scheme.
Auto Enrolment Options for Employees
Employees will have a number of options with their auto-enrolment pension. Some details of the auto-enrolment pension scheme still need to be confirmed by the government at the time of writing in April 2023.
The auto-enrolment pension scheme is built around voluntary participation however it has been built around an active opt-out instead of opt-in.
Generally, employees will be able to do the following:
- Employees have the option to opt-out after 6 months.
- Employees will have the option to suspend their payments for up to two years.
- After the suspended period ends employees’ payments will be restarted automatically.
- Employees can opt to stop again.
Employees will have a number of investment options available to them. There are still no details on the estimated fund growth of each of the below fund options.
- Conservative (e.g. an appropriate mix of Government bonds, cash and cash equivalents, blue chip private bonds and stock market index funds).
- Moderate risk (e.g. investment portfolio involving a mix of Government bonds, blue-chip equities, and property).
- Higher risk (e.g. predominately equities and property)
- Default (lifestyle/lifecycle product) – moving from adventurous to cautious over a person’s lifecycle.
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| Years | Employee Contribution | Employer Contribution | Government Contribution |
| 1 – 3 | 1.5% | 1.5% | 0.5% |
| 4 – 6 | 3% | 3% | 1% |
| 7 – 9 | 4.5% | 4.5% | 1.5% |
| 10 + | 6% | 6% | 2% |
Example Annual Contribution using Gross Salary of €35,000
| Years | Employee Contribution | Employer Contribution | Government Contribution | Total Annual Contribution |
| 1 – 3 | €525 | €525 | €175 | €1,225 |
| 4 – 6 | €1,050 | €1,050 | €350 | €2,450 |
| 7 – 9 | €1,575 | €1,575 | €525 | €3,675 |
| 10 + | €2,100 | €2,100 | €700 | €4,900 |
Possible Pension Fund based after 20 years based on 4% growth. Please note that pension funds rise and fall in value.
| Time | Potential Fund Value |
| At 5 Years | €9,191 |
| At 10 Years | €30,880 |
| At 15 Years | €64,110 |
| At 20 Years | €104,539 |
This minimum contribution will increase by 1.5% every 3 years, over 10 years, for a final total of 6%, (maximum salary counted is €80,000).
There isn’t tax relief on this scheme like other pensions. Instead, the government contributes 33% of the employee’s own contribution.
What are the Employer’s Responsibilities?
Employer contributions to the auto-enrolment pension scheme will be deductible for corporation tax purposes.
If you are an employer, it is your responsibility to ensure that your eligible employees are enrolled in a qualifying pension scheme and that contributions are made on their behalf.
It’s important for employers to keep track of their employees’ eligibility and ensure that they are enrolled in a pension scheme if they meet the criteria.
You must also provide information about the scheme to your employees and keep accurate records.
It’s important to stay up-to-date with any changes to the legislation and ensure that you are compliant with the regulations. Failure to comply can result in penalties and legal action.
Choosing a Pension Scheme
If employers want to look at setting up a pension scheme they need to understand the pros and cons of the auto-enrolment pension scheme.
Pension Auto-enrolment is perfect for:
- Low-income workers.
- Young workers.
- People who don’t have access to a pension scheme.
- People who aren’t interested in pensions.
Pension Auto-enrolment is less perfect for:
- Self-employed people aren’t eligible.
- High-income workers.
- High-taxation workers.
- Active & confident investors.
- People who want more choice than 3 funds in their investments.
When choosing a pension scheme for your employees, there are several factors to consider. You need to consider the fees and charges associated with any pension scheme, as well as the investment options available to your employees.
It’s important to communicate with your employees about the scheme and provide them with information about how it works and what their contributions will be.
You may also want to seek advice from a financial advisor or pension specialist to ensure that you are making the best choice for your business and your employees.
Can a company use a private pension scheme and auto-enrolment?
Yes, it looks like you can use regular pension schemes for additional contributions, regular & otherwise.
- If an employee is an existing member of an employee scheme, they won’t be auto-enrolled in the Government scheme.
- Employer contributions will start at 1.5% of salary (to a maximum of 80K).
- These contributions are still deductible for Corporation Tax for the employer
- For employees, it’ll be good for low-earners, but the max will still be low for high-earners.
- It also looks like there will be two separate tax treatments for Government contributions versus an employee’s own contributions.
- The Government contributions won’t be tax deductible for PAYE, instead, they’ll be matched at 33% of employee contributions.
- There’s no word yet on whether the Gov contributions would reduce the remaining max contributions to private pensions for an employee, but it might, because this is how the civil service pensions usually work.
- Payroll systems are already working on updates to make it easier for companies, so they’ll probably give the option for two types of deduction or report.
Companies that already operate a Defined Contribution Scheme for employees could be exempt from implementing the auto-enrolment scheme.
Employee pension schemes are a tax-efficient way to give your staff benefits, or if you’re a director who hasn’t planned their own pension, this is a great time to start.
Contact us here for more information about setting up your company pension scheme for employees and directors.
Read More: Automatic Enrolment Retirement Savings System (pension auto-enrolment) on gov.ie
Read More: Final Design Principles of an Automatic Enrolment (AE) Retirement Savings System for Ireland
