Understanding your pension at any stage can be challenging, but with Ireland’s new auto-enrolment scheme, there is an opportunity to get to grips with this hugely important part of your financial wellbeing. John Lowe ofMoneyDoctors.ie explains.
Auto-enrolment is the pension policy mechanism designed to increase participation in workplace pension schemes by automatically enrolling eligible employees while employers also make a contribution.
It was meant to start 1 January last month for all employers who do not have an occupational scheme set up whereby deductions directly from employee salaries are paid directly into My Future Fund, managed by a government organised entity: the National Automatic Enrolment Retirement Savings Authority (NAERSA).
The NAERSA will administer MyFuture Fund, leaving minimal administrative work for employers to do. It will also act as the caretaker of the employee’s interests and savings.
NAERSA will determine which employees are eligible for auto-enrolment using Revenue payroll data, and it will enrol them and will collect all employee, employer and State contributions, and invest the money on employees’ behalf.
A default investment strategy is in place, but some alternative investment options are available for those who may wish to make an active investment choice. NAERSA will allocate any investment returns to their savings pot. Employees will keep one savings pot as they move from job to job – this is known as the ‘pot-follows-member’ approach.
NAERSA is operating an online portal for employees, to manage employee opt-outs, opt-ins, suspension of contributions and re-enrolment. It is also operating an online portal for employers, to facilitate the payment and monitoring of contributions.
NAERSA will pay employees State Pension age, which is currently 66.
These are the contributions over the next 10 years for employer, employee and the State:
Year of the auto-enrolment scheme
Employee Contribution Rate
Employer Pays
Government Pays
1 to 3
1.5%
1.5%
0.5%
4 to 6
3%
3%
1%
7 to 9
4.5%
4.5%
1.5%
10 and after
6%
6%
2%
The employer and Government contributions stop when the employee’s salary reaches €80,000 for that year.
So what if there are employers out there who have ignored the requests to initiate auto-enrolment in their company? The penalties should not be ignored. The Automatic Enrolment Retirement Savings System Act 2024 creates significant sanctions:
Breach Type
Penalty Range
Additional Consequences
Administrative failures
€5,000 fixed penalty
Compliance notice issued
Preventing enrolment
€5,000 – €50,000
Potential prosecution
Inducing opt-outs
€5,000 – €50,000
Criminal conviction possible
Non-payment of
contributions
Amount owed + interest
Compensation to employees
Serious
non-compliance
Up to €50,000
Imprisonment up to three years
Beyond financial penalties, reputational damage from prosecution affects recruitment, retention, and business relationships. The Workplace Relations Commission also has powers to investigate complaints and order compensation.
Email me if you need clarification.
Remember, if your employees…
Are over 23 years of age and under 60 years of age
Earning at least €20,000 per annum
Irrespective of whether they have a personal pension or not, but do not have a company scheme with their employer
… then you need to act fast before penalties.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.
For more information, click on John Lowe’s profile above or on his website.