Auto-enrolment Pension Draft Legislation Approved

  • Employment Law

Peninsula Team, Peninsula Team

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Ireland’s new pension auto-enrolment scheme is one step closer to being implemented now that the draft legislation has been approved by the Cabinet.

The upcoming scheme is called the Automatic Enrolment Retirement Savings System, otherwise known as Auto-Enrolment (AE). It was announced in 2022 and is aimed at closing the pension gap in Ireland.

What’s happening next with pension auto-enrolment?

The scheme is now proposed to commence on 30 September 2025.

Ireland is the only OECD country without an auto-enrolment pension or similar system to encourage pension savings. The new system aims to make workplace pensions more accessible to employees.

What are the details of the pension auto-enrolment scheme?

The auto-enrolment pension system will apply to employees between the ages of 23 and 60 who earn over €20,000 per year and are not yet enrolled in any occupational private pension scheme. It’s estimated that as many as 800,000 workers will be enrolled once it kicks off.

Although employees will be automatically signed up, long-term participation is not mandatory. Workers will be able to suspend their payments or opt out after six months, although they will be re-enrolled after a period of two years if they are still eligible. There will be a range of savings funds for employees to choose from, which include a default fund and at least one alternative option.

And how does it work with State Pension?

Automatic enrolment is set to add to, not replace, the State Pension, which will remain in place to provide retirees with a basic level of income. The drawdown for auto-enrolment will also be aligned with the State Pension age.

How will this affect employers?

The pension auto-enrolment system will require employers to match employee contributions, which will be further ‘topped up’ by the State. For instance, for every €3 saved by a worker, the employer will put in a further €3 and the Government will add €1. This adds up to an additional €4 which would be credited to the employee’s pension savings account by the employer and the State, giving the employee €7 in their pension pot.

The scheme is set to be phased in gradually, with contributions increasing over time. Employer and employee contributions will start out at 1.5% of gross salary. Then, every three years, they will increase until reaching the maximum contribution of 6%.

What can employers do to prepare?

To manage this transition within your business and to take it in stride, it’s crucial to prepare now, before the scheme is implemented.

First, employers should consider the financial implications of making matching contributions, as this added labour cost could be substantial.

But what are some additional things that employers can do to set themselves up for success?

Employers can start to get ready for the pension auto-enrolment system by:

Additionally, it’s advised that all employers be prepared for questions from their staff. In this sense, a communication plan will help address any queries from their employees ahead of and during the system’s implementation.

Are there any benefits to and support for employees?

It’s hoped that the implementation of the auto-enrolment system could help reduce the pressure on employers to establish a pension scheme. In turn, this could also contribute to flattening recruitment benefits and aid in retention.

What’s more, there will be tax relief for employers as employer-side pension contributions will be deductible against corporation tax.

Need help getting prepared for pension auto-enrolment?

The roll-out of the new auto-enrolment pension system is set to be a major development in Irish employment law.

To find out more about how to prepare for its introduction, call one of our HR experts today at 1800 719 216.

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