What is Auto-Enrolment and what does it mean for you?
Auto-enrolment is a new pension system that the Irish Government is planning to introduce in 2024.
The Central Statistics Office reported for 2022 that only two thirds of workers in Ireland have some form of pension coverage outside of State Pension, which means a number or Irish people currently do not have any supplementary pension in place.
It is hoped that the AE system will increase pension coverage in Ireland and will assist approximately 750,000 people working in Ireland who currently are not saving for their retirement.
The Government has yet to publish the Bill that will introduce the AE system. Therefore, some of the nitty-gritty details are still to be worked out, but we have already an idea of what this system will look like.
The basic premise of AE is that employees who are not part of an existing pension scheme will be automatically added to the new pension system, where the employee makes payments which are then matched by their employer while also being topped up by the State.
When first joining the scheme, employees and employers will each contribute 1.5% of the employee’s net pay with a top-up of 0.5% state contribution. It is important to remember that while the contributions will come from net pay, they will be calculated on gross pay. It is possible to opt-out of the system, but employees who opt out will have the opportunity to be opted back in periodically.
The importance of everyone ensuring that they plan for their future and set money aside in a pension cannot be overstated. Whether you use the new AE system when it becomes available or save for your retirement through a workplace or occupational scheme or a personal pension products, having a plan for retirement will allow you to make the most of the time and keep you comfortable as you grow older.
Will I be eligible?
According to the AE Design Principles, published in April 2022, those aged between 23 and 60 years old who earn above €20,000 per year and who are not currently part of a pre-existing pension plan will be automatically enrolled in the scheme.
This applies to people who are on probation, full-time, part-time, or on a casual basis. Those who are self-employed will not be eligible for the scheme.
Those who are already enrolled in a pension plan when AE comes into play will not be automatically enrolled in this new system.
How will it impact employers?
Employers that already have workplace pension schemes in place will have a choice on how to proceed. It will be possible for employers to simply adapt their existing scheme to meet the AE standards. Alternatively, employers can opt to retain their existing scheme with no changes and also introduce an AE scheme for those who are not eligible for the existing scheme.
