The upcoming Pension Auto-Enrolment in Ireland, set to commence in 2026,involves the following key elements.

Automatic Enrolment

Employees aged 23 to 60 earning over €20,000 annually will be automatically enrolled in a pension scheme.

Contributions

Initial contributions start at 1.5% of an employee’s gross salary, matched by the employer, with a gradual increase to 6% over a decade.

The government will provide a top-up of €1 for every €3 contributed by the employee.

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Opt-out Option

Employees can opt out or suspend contributions after a minimum participation period but will be automatically re-enrolled every two to three years.

The primary goal is to increase retirement savings among private-sector workers who currently have no occupational pension coverage.

This initiative aims to enhance financial security for future retirees by ensuring broader participation in pension savings.

Employer Alternatives to Auto Enrolment

While Auto-Enrolment is compulsory for all eligible employees, employers can be exempted from this process, once they have an existing payroll deduction scheme in place (Group or PRSA).

Employer Alert:

Employers should note that the Auto-Enrolment compulsory contribution rise to 4.5% to 6% after 5 years in the scheme. This may simply be unaffordable for some employees, employers & other sections of industry.

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Why a PRSA is the cheapest alternative

Once an employer has a group PRSA for eligible employees, they are exempt from enrolment to the gradually increasing AE scale. Accordingly, an employer who had a Group PRSA connected to e.g. for example, 3% contribution of salary, is not obliged to follow the increased AE scale each year. Putting a PRSA in place now, will eliminate the risk of higher scaled contributions in future years i.e. avoiding the necessity of providing 4.5% upwards per annum in the future. This is an important cost control consideration.

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FAQ’s

Frequently Asked Questions

Prices & Charges: We evaluate the policy & management charges from all regulated pension & PRSA providers in Irelandadmin2024-06-12T01:34:16+01:00

Prices & Charges: We evaluate the policy & management charges from all regulated pension & PRSA providers in Ireland

For each €1 saved by an employee, €2.33 would be credited to their pension savings account comprising their €1 personal contribution, plus €1 from their employer, plus €0.33 from the State.

So for every €3 an employee contributes, they will receive a further €4 into their pension pot.
The added incentives are aimed at encouraging workers to remain in the scheme by reducing their costs of saving for retirement.

Detailed examples of projected earnings for different life and work situations can be found in the Department of Social Protection document, The Design Principles for Ireland’s Automatic Enrolment Retirement Savings System.

Opting in/out option: All eligible employees will be automatically enrolled in the scheme.

However, participation is optional and operates on an opt-out basis.
Employees who have been automatically enrolled can choose to opt out or suspend their participation after six months.
Those who opt out will be auto-enrolled after two years have elapsed and they can opt out again after another six months.
If an employee opts out, they’ll receive a refund of their (employee) contributions, but employer and state contributions will remain in their pot.
Members will be able to pause their contributions after 6 months of saving, suspending their contributions for a maximum of two years.
They won’t receive a refund on what they’ve saved so far and can restart their saving at any time before the auto-restart.
Choice of funds: Employees will have a choice of four retirement savings funds to choose from, depending on the level of risk they prefer.
Three of these funds will have differing risk/return profiles comprising a conservative fund, a moderate risk fund and a higher risk fund.
The fourth option – a ‘life-style/life-cycle’ investment profile – will be the default fund provided if the employee doesn’t express a preference.
Moving jobs: The scheme will be set up on a ‘pot follows the member’ basis, so an employee’s pension is not linked to their employment but follows them as they move jobs.
This means workers will not have to join a new scheme each time they change employer and those who have more than one employment will have their pension savings combined into one pot.

Participants of the new scheme will be able to access their account via an online portal run by the CPA.
They’ll be able to view account balances, contributions and investment returns and update information or suspend their payments.
When will the auto-enrolment scheme begin?: Legislation and processes will be implemented from now, with the launch of the scheme and paid contributions to start from January 2025. Contributions will be gradually phased in over 10 years, with employee and employer payments beginning at a modest level of 1.5% and increasing every three years by 1.5% until they reach 6%.

How much will Auto-Enrolment cost?admin2024-07-29T22:06:27+01:00

How much will Auto-Enrolment cost?

Employer contributions will stand at 1.5% of gross pay.

In year 4 that will increase to 3%
In year 7 that will increase to 4.5%
In year 10 that will increase to the maximum rate of 6%

Contributions will be fixed and employers and employees won’t be able to contribute less or more than the set rate.

State Contributions under Auto-Enrolment: (Information extracted from Gov.ie Jan 2024)

Year 1 – 3	0.5%
Year 4 – 6	1%
Year 7 – 9	1.5%
Year 10+	6%

However, benefits may not be extracted until employees reach full statutory retirement status (age 66+) It may be in both employer and employee’s interest to start a PRSA contribution which may lead to early retirement benefits.

Note: Once there is an employer PRSA with employer benefits being regularly extracted through the payroll system, both employer and employee are exempt from enforced auto-enrolment.

How will Auto-Enrolment work?admin2024-06-08T05:49:32+01:00

How will Auto-Enrolment work?

In the past it was up to employers to decide whether they wanted to have a pension scheme or not and it was up to the employee to decide whether they wanted to join their employer’s scheme.

Once enacted, people who do not have a pension scheme, earn more than €20,000 per annum and are aged between 23 and 60 will be automatically enrolled into the new mandatory system.

Do employers contribute to a PRSA?admin2024-06-12T01:23:53+01:00

Do employers contribute to a PRSA?

Employers can contribute to a PRSA and since 2023 there is no limit on the employer’s contribution. However, there is no obligation on the employer to contribute, at present.

So is a PRSA mandatory in Ireland?admin2024-06-12T01:32:24+01:00

So is a PRSA mandatory in Ireland?

Employees who are not entitled to gain access to an employer’s Occupational Pension Scheme or Group scheme within 6 months of service must be given access to a PRSA by their employer.

As an employer, am I obliged to have a group pension?admin2024-07-29T22:08:54+01:00

As an employer, am I obliged to have a group pension?

There is no legal obligation for an employer to set-up or contribute to a pension at present. However,

The government of Ireland intend on introducing Auto-Enrolment in 2024.
Find out more about Auto-Enrolment→
If an employee does not have a pension scheme, the employee will need to provide an employee with access to at least one standard Personal Retirement Savings Account i.e. a PRSA

However, when the current legislation which has passed all stages of Oireachtas is introduced in 2025, all employers and employees who are not contributing to an employer based regular payroll pension and PRSA scheme will be auto-enrolled at the minimum statutory levels required for their income and age.

Typically, an employer based PRSA which administers the payroll deduction process is the best and cheapest way for both employer and employees to make contributions and be exempt from auto-enrolment enforcement.

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