Automatic Enrolment in Ireland: What employers need to know
What is automatic enrolment?
The Automatic Enrolment Retirement Savings Systems Act 2024 (Act) was recently enacted in July 2024 to introduce a new system of retirement savings in Ireland known as automatic enrolment (AE). Eligible employees will be automatically enrolled into a new pension scheme under which the employee, the employer and government will pay contributions.
When will the new system come into effect?
It is intended that the AE system will be introduced in January 2025. Employers ought therefore to consider what their duties will be now, to ensure they will be able to comply. Employers who take no action may face unexpected challenges in managing two different pension systems.
Why is the new system being introduced?
The new system will provide a pension scheme for individuals that are not already enrolled in a workplace or private pension scheme. A key policy aim is to encourage more people to start saving for their futures, so that they have sufficient income to support their retirement.
Which employees are eligible for AE?
Employees who are eligible for AE include those who are:
- aged between 23 and 60;
- earning over EUR20,000; and
- not already in an occupational or private pension scheme.
Employees will be able to opt-out or suspend participation after six months, but would then be automatically re-enrolled every two years. Employees who do not meet the eligibility criteria can opt-in on a voluntary basis.
What contribution rates will apply?
Employees will make contributions from their salary, which will be matched by their employers and topped-up by the government on gross earnings up to EUR80,000.
The contribution rates will be increased on a phased basis, as follows:
|
Contributor |
Years 1-3 |
Years 4-6 |
Years 7-9 |
Years 10+ |
|---|---|---|---|---|
|
Employee |
1.5% | 3% | 4.5% | 6% |
|
Employer |
1.5% | 3% | 4.5% | 6% |
|
Government |
0.5% | 1% | 1.5% | 2% |
There are currently no plans to allow employees to make additional contributions under the AE system.
Can an existing pension scheme be used to meet AE obligations?
Employers can use an existing pension scheme to meet the new AE obligations if they obtain the consent of affected employees.
If any employees do not provide their consent, employers may need to operate a "dual system" where contributions are paid into the existing scheme for some employees and into the AE scheme for others.
As this would give rise to different administration, costs and contribution levels, employers may wish to seek legal advice on how to manage this situation. For example, it may be possible for some employers to vary employment terms and scheme eligibility criteria, so that AE duties can be satisfied under one scheme.
What happens if employers fail to comply?
The Act contains a number of offences relating to non-compliance with AE duties, some of which can attract a fixed penalty of up to EUR5,000. More serious offences can result in fines of up to EUR50,000 and/or a term of imprisonment not exceeding three years.
What should employers be doing now?
- Assess the workforce to identify eligible employees who are not already part of the employer's existing pension scheme.
- Consider the additional administration, costs and contribution levels that may apply if some employees need to be enrolled in the AE scheme.
- Review the existing scheme rules and employment terms to check the current eligibility criteria for pension scheme membership.
- Consider whether the nature of the workforce poses any tricky issues (eg overseas workers, secondments, self-employed status, high employee turnover and/or workers with fluctuating earnings).
- Engage with affected employees to ensure they are fully informed about the extent to which the new system will apply to them.
Contact us
For more information, please feel free to get in touch with Tamara Calvert, Gary Davies or Ciara McLoughlin or your usual DLA Piper contact.
Contributed by Tilly Smith.
