What Auto Enrolment Means for Irish Employers
What is Auto Enrolment?
Auto Enrolment is set to begin in January 2024. This supplementary Pensions Retirement Savings and investment scheme has been created because too few people have sufficient pension coverage to enable a reasonable standard of living in retirement above the level of the State Pension.
Who will be Automatically Enrolled?
Approximately 750,000 employees – aged between 23 and 60, earning over €20,000 who are not already enrolled in an occupational pension scheme will be automatically enrolled in the new scheme.
While participation in the new scheme will be voluntary, workers will have to opt-out if they do not wish to avail of the scheme. Employees will have the choice after six months participation to opt out or suspend participation. How ever it may be worth noting that those who have opted out will be automatically re-enrolled after two years.
Those outside the eligibility criteria – for example, employees earning less than €20,000 a year – will be able to opt-in if they wish to do so.
How will Auto Enrolment work?
The pension savings will transfer with a worker if they switch jobs in a ‘pot-follows-member’ system whereby participants will benefit from owning one single Auto Enrolled pension pot across their working lives.
Contributions will be paid as a percentage of the employee’s gross income. Contributions will be paid by employees, matched by their employers, and supplemented by the State. The rates of contribution will be phased-in as follows:
|Years 1 – 3||1.5%||1.5%||0.5%|
|Years 4 – 6||3%||3%||1%|
|Years 7 – 9||4.5%||4.5%||1.5%|
|Year 10 +||6%||6%||2%|
Employer contributions need only to be paid on incomes up to €80,000, although employees may contribute on earnings above this threshold if they wish.
A Central Processing Authority (CPA) will be set up to administer the system on behalf of enrolled employees, their employers and the State as well as operate an online accounts portal where participants can review their savings.
What can Employers do to prepare for Auto Enrolment?
As of yet there is no action that employers need to take. Employers should be mindful of the potential need to ensure that any existing pension schemes meet or exceed the prescribed standards and contribution levels of the Auto Enrolment scheme.
Employers should also make themselves aware of the trajectory of the scheme and make themselves aware of the following proposed timeline.
|Q2/Q3 2022||Establish CPA on administrative basis within Department of Social Protection|
|Q3/Q4 2022||Legislative Heads of Bill drafted and Government approval|
|Q3 2023||Legislation enacted|
|Q4 2023||CPA organisation established on statutorily independent basis|
|Q4 2023||Completed development/procurement of initial IT system/infrastructure|
|Q4 2023||Procurement of investment managers completed|
|Q1 2024||Commencement of automatic enrolments|
For more on Auto Enrolment Pension Schemes read:
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