What does the new auto enrolment pension scheme mean?

Who is eligible, how much will employers pay and when will it come into effect?

The Irish State’s auto-enrolment pension scheme is due to start operating in 2024, giving employees access to a workplace pension savings scheme which is co-funded by their employer and the State. But what does it mean for small business owners?

Who will be enrolled in the scheme?

The scheme will be opt-out rather than opt in and applies to domestic workers. Those over the age of 23 and under the age of 60 who earn more than €20,000 per year will be automatically enrolled in the pension scheme if they are not already signed up to an occupational pension scheme. Those earning under €20,000 will not be automatically enrolled but will have the choice to opt in. Likewise, workers under the age of 23 can opt into the Scheme.

What does it mean for employers?

The new system aims to make it easier for employers to offer a workplace pension. The State is setting up a Central Processing Authority which will administer the scheme. It will work with payroll providers, like Small Business Payroll, to collect pension contributions via payroll. We’ll handle enrolments, opt-outs and pension contributions on your behalf.

How much will I pay?

Auto Enrolment is due to commence in 2024 and will be implemented on a phased basis over a ten year period – employees and their employers will make initial contributions of 1.5% of gross earnings, rising by 1.5 percentage points every three years until it reaches a maximum contribution rate of 6% in Year 10.

What are the benefits for my employee?

In order to encourage workers to participate, employees will have their pension savings matched on a one-for-one basis by the employer. The State will also provide a top-up of €1 for every €3 saved by the worker. This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined.

What if my employee doesn’t want a pension?

People who are automatically signed up to the scheme will be able to leave it during a two-month window after six months, but they will only get back their own contributions and not yours or the Government’s share. After two years, they will automatically be re-enrolled.

What if my employee moves jobs?

The pension savings will transfer with a worker if they switch jobs, so employees will not have to move their pension across to a new scheme.

Find more details of the Automatic Enrolment Retirement Savings System here.

For help navigating State-backed pension contributions for your employees or other Government wage subsidy schemes, contact the team at Small Business Payroll can help.