Auto Enrolment Pensions

Not having a private pension means that you will be wholly reliant on the State pension when you get older. The full State pension is just over €250 a week, so this means many workers could see a major reduction in their living standards when they retire.

Many workers, for a variety of reasons, are slow to enrol in pension schemes. To address this, the Government is now making it mandatory for all employers to contribute towards a worker’s pension, which will be co-funded by the State, and for workers to be automatically signed up for a pension when they start work.

If the legislation passes through the Oireachtas auto enrolment will start sometime in late 2025 or 2026.

The proposed rates of payment are for every €3 that you save into a pension, the Government will put in €1, up to a limit. So if you were to save €100 a month, the Government will add another €33.

The employer will also gradually have to match any contributions you make up to 6% of your salary. This will start off at just 1.5% but gradually increase to 6% by year 10. Workers can choose to save more but the employer and the Government won’t be required to match it.

How will it work - anyone between the ages of 23 and 60, and who is earning over €20,000 a year, will automatically be enrolled into the pension scheme when they start a new job unless they have their own pension or access to an occupational pension. People under 23 and earning less that €20,000 can choose to opt in if they want to. Workers will be able to opt-out or suspend their contributions after six months. But, they will be re-enrolled after two years. Once re-enrolled they can again opt out after another six months if they want to. The aim is clearly to get employees to remain enrolled.

What will happen to the State pension - nothing is changing to the State pension for now and it will remain the bedrock of people’s income when they retire. A worker’s PRSI payments will continue to go towards their State pension.

As with any pension plan, your money will be invested in a mixture of stocks, government bonds, commercial property and commodities through a so-called ‘managed fund’. Providers will offer four managed funds to choose from with various levels of risk/potential returns.

Several countries have automatic pension schemes and they are viewed as a good way to get people saving for a pension early.