Pension Auto-enrolment
On 29 March, the Minister for Social Protection, Heather Humphreys, announced the details of the Final Design principles for the Government's planned Automatic Enrolment Retirement Savings System for Ireland.
Points of note:
- approximately 750,000 workers to be enrolled into a new workplace pension scheme
- participation in the new scheme will be voluntary - workers will have the ability to opt-out
- scheme includes matching employer contributions and a State Top-u
- for every €3 saved by a worker, a further €4 will be credited to their pension savings account
- when fully established a worker earning €35,000 p.a. will accumulate a fund (excluding investment returns) of €293,000 over their working life
- the new system will account for about €21 billion in funds (excluding investment returns) after 10 years
Under Auto Enrolment employees will have access to a workplace pension savings scheme which is co-funded by their employer and the State. A key feature of the system is that although participation is voluntary, so that people do not have to participate, it operates on an ‘opt-out’ rather than an ‘opt-in’ basis.
To encourage workers to participate, those people who choose to remain in the system will have their pension savings matched on a one-for-one basis by the employer. The State will also provide a top-up of €1 for every €3 saved by the worker. This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined.
According to figures from the Central Statistics Office, the rate of supplementary pension coverage is around 56% of the working population. This is based on the CSO (Central Statistics Office) Pension Coverage Survey 2021. It is estimated that this figure may be as low as 35% when the private sector is considered in isolation. As a consequence of this low supplementary pension coverage rate, there is a concern amongst policy makers, that many retirees could suffer an unwanted reduction in living standards when they retire.
Minister Humphreys said that implementation of Auto Enrolment will commence immediately and will continue throughout this year and next.
Timeline for Delivery:
|
Establish CPA on administrative basis within Department of Social Protection |
Q2-Q3 2022 |
|
Legislative Heads of Bill drafted and Government approval |
Q3-Q4 2022 |
|
Legislation enacted |
Q3 2023 |
|
CPA Organisation established on statutorily independent basis |
Q4 2023 |
|
Completed development/procurement of initial IT system/infrastructure |
Q4 2023 |
|
Procurement of investment managers completed |
Q4 2023 |
|
Commencement of automatic enrolments |
Q1 2024 |
Further information and more details on the key features of the Government’s Auto Enrolment Scheme are available here.
Should you require any further advice, you can contact Emma Crowley, HR Executive, on (01) 605 1668 or emma.crowley@sfa.ie for further information on any of the above.
