Auto-enrolment – the new retirement savings scheme for Irish employees – will commence in January 2025.
The scheme will be rolled out to over 750,000 workers with no form of occupational pension cover. So, what does auto-enrolment mean for employers and employees?
Auto-enrolment for employers
Auto-enrolment will start in January 2025 as the Minister for Social Protection, Heather Humpreys, has confirmed. She strongly advised all employers to budget for that timeline.
Employers need to take action now, especially for employees who are not currently enrolled in a pension plan.
- Employers should identify all employees who will or could be affected by Auto Enrolment. What are your obligations?
- Consider potential impacts on existing pension plans, and if there will be a need to operate different pension arrangements.
- Understand the cost implications.
- Start communicating with employees about the changes now.
Auto-enrolment for employees
Under the Auto Enrolment plan, employees and employers will initially each pay 1.5% of gross salary into the scheme the employee contribution will be a net deduction. Contributions will be raised over 10 years, increasing every three years until they reach 6%. Employers match employee contributions, and the State then top’s up.
- Employees who earn more than €20,000 p/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.
- Irish executives with pension funds over the standard fund threshold of €2m may be caught by auto-enrolment’s broad net and will need to take action if so.
This is a once-in-a-generation pension policy (that has been in the pipeline for years) and it’s likely to create challenges for businesses as it rolls out.
Please contact our office regarding this matter for further information. Kieran Horgan, HTH Accountants
