Auto-enrolment – the “transformative scheme” people don’t know about
Auto-enrolment – the new retirement savings scheme for Irish employees – is due to commence in the second half of 2024 but research suggests many employers and employees are unaware of how it will affect them.
Research has found 70% of people surveyed were unaware of Government plans to introduce pension auto-enrolment (AE) in the second half of 2023. As proposed the scheme will be rolled out to over 750,000 workers with no form of occupational pension cover, but a survey by Standard Life found 46% of those currently were unaware of the plans. So what does auto-enrolment mean?
Auto-enrolment and Irish employees
The Minister for Social Protection, Heather Humpreys, is bringing forward draft legislation in the scheme in the new Dáil session, starting in Sept 2023. While the timeline of the scheme launch was pushed out to the second half of 2024, the Minister has now stated that this deadline for the “transformative scheme” will be met.
Under the AE plan, employees and employers will initially each pay 1.5% of gross salary into the scheme. Contributions will be raised over 10 years, increasing every three years until they reach 6%. Employers match employee contributions, and the State then top up.
- Employees who earn more than €20,000p/a, between 23 and 60, and who do not have a pension scheme will be automatically enrolled into the new system.
- People earning under €20,000, and those outside the age bracket will also be able to opt in, as long as they aren’t already in a pension scheme.
- Each €3 contributed by employees will be matched by their employer, with the State adding a further €1.
- Employer and State contributions will be capped at €80,000 per year.
Despite the lack of awareness around auto-enrolment, sentiment towards pensions generally remains positive. Nearly 78% of workers say an employer’s contribution towards their pension is a very important factor when considering a new job.
This “transformative scheme” has been described as a once-in-a-generation pension policy and it’s likely to create challenges for businesses as it rolls out, says Caroline Codd, our payroll manager. Payroll, in particular, will need to stay well ahead of the scheme’s introduction and implementation.
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