- auto-enrolment scheme is a semi-mandatory retirement savings system designed to give employees extra income in retirement
- every €3 an employee contributes will be matched by their employer, and the state will top up with a further €1
- employees who are enrolled will have to stay in the system for six months, but they will be free to opt out in months 7 and 8 if they so wish
- in the first ten years, employees will also be able to opt out in months 7 and 8 after each contribution rate increase
- employees will also be able to suspend or pause their contributions at any time outside of the mandatory six-month participation period
- all contributions – from the employee, the employer and the state – will cease when an employee opts out or suspends their contributions
- employees who opt out or suspend their contributions will be automatically re-enrolled after two years, once they are still eligible for the scheme
- initially, while contribution levels and pots are low, a lump sum will be paid on retirement. In the future more pension products are likely to be made available
- employees earning over €20,000 per year, aged between 23 and 60, and who aren't already in a pension scheme
- those outside the earnings and age cohort, and who aren’t already in a pension scheme, will not be auto-enrolled, but they may choose to opt in if they wish
- employee contributions will start at 1.5% of gross pay
- in year 4 they will increase to 3%
- in year 7 they will increase to 4.5%
- in year 10 they will increase to the maximum rate of 6%
- all employee contributions will be matched by their employers and topped up by the State
- contributions will be fixed and employees won’t be able to contribute less or more than the set rate
- more money in retirement
- contributions will be boosted by matching employer contributions and state top-up
- if employees move jobs they can keep paying into the same account
- employees won’t have to make an investment decision as there will be a default fund
- employees will be able to view their account on an online portal
- contributions and investment returns will be the employee’s property, protected under the Constitution and therefore cannot be accessed by anybody else
- the large number of participants and money that will accumulate in the system over time will ensure that shared costs and fees can be kept to a minimum
- all of your employees meeting the eligibility criteria, who do not already have a pension scheme will be enrolled into the auto-enrolment pension
- you will need to ensure that your payroll can take instruction for enrolment, calculate and pay employee and employer contributions to the National Automatic Enrolment Retirement Savings Authority (NAERSA)
- you will be required to match members’ contributions up to an eventual maximum of 6% subject to an earnings threshold of €80,000
- employer contributions will be deductible for corporation tax purposes
- if you fail to meet your auto-enrolment obligations as an employer, you will be subject to penalties and possibly to prosecution
- employer contributions will start at 1.5% of gross pay
- in year 4 they will increase to 3%
- in year 7 they will increase to 4.5%
- in year 10 they will increase to the maximum rate of 6%
- contributions will be fixed and employees or employers won’t be able to contribute less or more than the set rate
As an illustrative example, for someone earning €20,000 per year, the actual amounts are:
| Employee Yearly Contributions | Employer Yearly Contributions | State Yearly Contributions | Total Yearly Contributions | |
| Year 1 to 3 (contribution rate at 1.5%) | €300 | €300 | €100 | €700 |
| Year 4 to 6 (contribution rate at 3%) | €600 | €600 | €200 | €1,400 |
| Year 7 to 9 (contribution rate at 4.5%) | €900 | €900 | €300 | €2,100 |
| Year 10 + (contribution rate at 6%) | €1,200 | €1,200 | €400 | €2,800 |
- not having to pay to set up a company pension scheme
- not having to administer a company pension scheme
- ensuring that employees are looked after
- increased competitiveness and attractiveness as an employer
- employer contributions will be deductible for corporation tax purposes
- from a market/consumer demand perspective, ESRI research indicates that auto-enrolment will be good for the economy in the long-term, as retired people will have more money than they would have otherwise. This will help to sustain consumer demand and business revenues
- the employer contributions reflect these benefits and recognise that employers benefit from employees having retirement income security and a greater sense of wellbeing
- pension provision is not a matter that can be left to employees or the state alone. It is an important element of a tri-partite social contract in a developed economy, recognising that making provision for retirement income is a cost that should be shared between all parties that benefit
- the auto-enrolment scheme has been designed to run in parallel with the existing pensions industry
- people who are already enrolled in an occupational pension scheme or equivalent personal pension scheme will not be automatically enrolled into the new system
- commercial providers will have the opportunity to be involved in the auto-enrolment system through separate tenders for investment management, administration and fund accounting services
- the providers chosen to provide investment management services will be called ‘Registered Providers’
- the Registered Providers will not have any direct contact or relationship with the employees – the National Automatic Enrolment Retirement Savings Authority (NAERSA) will be their single customer
Further information on the tender process and the types of funds that Registered Providers will be required to provide will be available soon.
- it will eventually become an independent, statutory body
- it will tender for investment management, administration and fund accounting services
- it will collect contributions from the employee, employer and the State
- it will distribute contributions to the Registered Providers for investment
- it will allocate investment returns to employee accounts
- it will operate the online portal where employees can see their account balance and make decisions such as opting out
- it will be responsible for compliance with the scheme
- it will ensure that the participants interests are at the heart of the system
- it will facilitate the ‘pot-follows-member’ approach whereby employees will have only one account with the National Automatic Enrolment Retirement Savings Authority over their working life
- economies of scale over time will allow the National Automatic Enrolment Retirement Savings Authority to keep fees and costs down