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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. 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. |
Participants of the new scheme will be able to access their account via an online portal run by the CPA. |
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.
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.
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.
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.
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.