By: HUB’s EB Global Benefits Team

What Is It About?

In early 2025, Ireland is set to launch an Auto Enrolment (AE) pension scheme, a crucial development after nearly two decades of planning. This follows the passage of the Auto Enrolment Retirement Savings System Bill 2024 by both Houses of the Oireachtas, now pending presidential approval. As the latest OECD country to adopt such a system, Ireland aims to significantly broaden pension coverage.

Under the new legislation, all employees aged 23 to 60 earning over EUR 20,000 annually will be automatically enrolled in the scheme, unless they are already contributing to a qualifying pension plan. Those outside this age bracket have the option to opt-in voluntarily. The scheme will be managed by the newly established National Automatic Enrolment Retirement Savings Authority, which will oversee the phased implementation of contributions.

Initially, employers and employees will each contribute 1.5% of the employee's gross salary, complemented by an additional 0.5% contribution from the state. Over a ten-year period, employer and employee contributions will gradually rise until they each reach 6%, plus 2% from the state. A cap on contributions will be in place, based on an income threshold of EUR 80,000.

Employees will have the flexibility to opt out after six months of participation; however, they will be automatically re-enrolled every two years, ensuring continual encouragement to save for retirement. The system is designed to be inclusive, automatically enrolling eligible employees to promote widespread participation and mitigate the risk of inadequate pension savings.

The administrative aspect of the scheme aims to minimize the burden on employers by centralizing the management of contributions and investments, thereby simplifying the process. Employers will facilitate payroll deductions but will not need to manage the pension funds directly. This central management approach is expected to reduce administrative costs and complexities associated with individual employer-managed funds.

This new system reflects a significant policy shift towards securing financial stability for retirees and represents a major milestone in social welfare policy in Ireland. As the system's implementation approaches, both employers and employees are encouraged to familiarize themselves with the new requirements to ensure smooth integration into their financial planning and operations.

Impact of Law on Companies

  • Companies will need to review and possibly realign their existing pension schemes with the new Auto Enrolment requirements to ensure they remain competitive and compliant with national legislation.
  • Companies will need to adjust their payroll systems to accommodate new deductions and contributions, which may require an update in administrative processes and additional HR resources to manage compliance.
  • The new AE scheme requires companies to plan for gradual increases in pension contributions, demanding a reevaluation of long-term financial strategies to accommodate the phased contribution structure.

Suggested Employer Action

  • Assess current pension schemes and decide whether to integrate them with the new Auto Enrolment system or to maintain separate plans.
  • For companies without existing schemes or those looking to enhance their offerings, consider adjustments to employment contracts for both new hires and existing employees to help streamline the integration of the new requirements.
  • Proactively communicate with employees about the upcoming changes, providing them with information on Auto Enrolment to ensure a smooth transition.
  • Consult with pension experts and benchmark against industry standards to understand how best to structure the company's pension offerings and the current competitive position in the market.
  • Plan for the increased financial load by adjusting financial strategies to accommodate the additional pension contributions without disrupting the operational budget.

If you have any questions, please contact your HUB Advisor. View more updates in our Global Benefits Directory.