- The government’s new auto-enrolment scheme has been described as a ‘once-in-a-generation’ pension policy. As the only OECD country without a mandatory retirement savings system, Ireland is playing pensions catch-up with most of the developed world. The details of the new auto-enrolment (AE) system, which has been in planning since 2018, was announced in March 2022 and expected to be introduced in 2024.
In the UK, the introduction of an auto-enrolment system similar to that planned for Ireland doubled the rate of participation in private pension savings in a decade. The behavioural change was quite significant. In Ireland only 35% of private sector workers are currently included in a pension scheme. Hundreds of thousands of Irish workers are set to benefit from AE and the Department of Social Protection estimates that around 800,000 workers will be enrolled into a new workplace scheme which will make a real meaningful difference to their retirement income when they retire.
The current qualifying criteria are workers aged 23-60, and earning over €20,000, who are not already enrolled in an occupational scheme will be automatically enrolled. The Joint Committee on Social Protection recommends that the lower age limit be reduced from 23 to 16 years, aligning it with the PRSI minimum age and the lower income threshold of €20,000 be removed as it can penalise young workers, low earners, and disproportionately women.
A key feature of the system is that although participation is voluntary, it operates on an ‘opt-out’ rather than an ‘opt-in’ basis. If after six months a worker wanted to opt-out, they can but they will be re-enrolled again after two years. The aim is to encourage workers to recognise the importance of saving for retirement through a pension plan.
Workers will have their pension savings matched on a one-for-one basis by their employer. The State will also provide a top-up of €1 for every €3 saved by the worker.
After decades of talking about auto-enrolment in this country the introduction in 2024 is largely welcomed and will capture most employees. However, the proposed scheme is not without its challenges such as the initial low level of pension contribution, specific cohorts being unable to participate in the scheme due to their age, and additionally, the lack of any risk-related benefits such as Life Cover and Income Protection.
Employers are constantly trying to attract and retain staff and offering pensionable employment is an excellent way to do so, differentiating your business from competitors.
CPAS who administer both the Construction Executive Retirement Savings (CERS) and the Construction Workers Pension Scheme (CWPS) believe companies should proactively get ahead of auto-enrolment and set up a pension scheme now which will negate your upcoming auto-enrolment obligations and avoid any backlog that might arise.
If you are concerned about your auto-enrolment obligations and what it means for you and your organisation, please do not hesitate to contact the dedicated team on 01 2234947 or email j.geraghty@cpas.ie
John Geraghty, CPAS
