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Pension Auto-Enrolment – What we know so far

Auto-Enrolment

The Department of Social Protection published a summary of the employer and employee implications of Auto-Enrolment, which is due to commence in January 2024. Some of the main points are as follows:

Auto Enrolment (AE) for Employees

  • Employees aged between 23 and 60 years, who earn more that €20,000 per year across all employments, and who are not currently a member of a workplace pension scheme, will be automatically enrolled in the AE scheme.
  • Employees outside the earnings and age brackets, who are not a member of a workplace pension scheme or PRSA, may opt into the scheme.
  • Eligible employees will be enrolled in the scheme for the first 6 months. There will be a 2 month window during month 7 and 8 where employees can opt out.
  • Employee contributions will start at 1.5% of the gross pay. They will increase to 3% in year 4, 4.5% in year 7, and 6% in year 10.
  • In month 7 and 8 following each rate increase, employees will also be able to opt out.
  • Employees who opt out will receive a refund on their employee contribution. The employer contribution and State contribution will remain in the pot.
  • Employees will be able to suspend their contributions at any time outside of the 6 month mandatory participation period.
  • Every €3 an employee contributes will be matched by an employer contribution, and the State will also top-up by a further €1. Employer and State contributions will be capped at an upper earnings limit of €80,000 per year.

AE for Employers

  • Employees who meet the eligibility criteria, who are not provided with a workplace pension or PRSA, will be enrolled.
  • Employers will not be responsible for deciding who should be enrolled.
  • Employers will need to ensure that their payroll software will be capable of taking an enrolment instruction, calculating and returning contribution amounts to the Central Processing Authority (CPA).
  • While contributions will be calculated based on the employee’s gross pay, they will be deducted from the employee’s net pay.
  • Employers will be required to match the employee’s pension contribution, subject to an upper earnings limit of €80,000.
  • Employer contributions will be deductible for income tax/corporation tax purposes.
  • Employers who fail to meet their obligations will be subject to penalties and possible prosecution.

The Central Processing Authority (CPA)

  • The CPA will be the body responsible for the administration of AE.
  • It will decide which employees should be enrolled and inform employers.
  • It will collect contributions from employers and the State and distribute them to Registered Providers for investment.
  • It will operate an online portal where employees can log into their account, see their account balance and make decisions such as opting out.
  • It will facilitate the ‘pot-follows-member’ approach whereby employees will have only one account with the CPA over their working life.
    Auto Enrolment for the Pensions Industry.
  • Designed to run in parallel with the existing pensions industry.
  • Existing pension schemes or PRSAs will continue. Employees who are contributing to workplace pensions or PRSAs will not be eligible for AE.
  • Pension providers will have the opportunity to be involved in the AE system and those selected to provide investment management services will be called Registered Providers.
  • Registered Providers will not have any direct contact or relationship with employees.

The HR Team are watching this space tentatively for the proposed start date of January 2024. Any queries in relation to this topic contact [email protected] or Phone 01 6622755 Option 2.