Auto-enrolment is Coming

What is auto-enrolment?

Auto-enrolment is a new retirement savings system for employees that will be introduced by legislation in 2024. The purpose of the legislation is to ensure that people currently without a pension will have their state pension topped up to ensure they will stay above the poverty line in retirement.

The new pension contributions will be phased in so that everyone can get used to the new system without a steep change in income.

What auto-enrolment pensions means for employers

• all of your employees meeting the eligibility criteria (employees earning over €20,000 per year, aged between 23 and 60) who do not already have a pension scheme will be enrolled into the auto-enrolment pension.
• you will need to ensure that your payroll can take instruction for enrolment, can calculate and pay employee and employer contributions to the Central Processing Authority.
• you will be required to match members’ contributions up to an eventual maximum of 6% subject to an earnings threshold of €80,000.
• employer contributions will be deductible for corporation tax purposes.
• employees who are enrolled will have to stay in the system for six months, but you will need to allow them to opt out in months 7 and 8 if they so wish.
• all contributions – from the employee, the employer and the state – will cease when an employee opts out or suspends their contributions.
• you will need to automatically re-enrol employees who opt out or suspend their contributions, after two years, once they are still eligible for the scheme.
• if you fail to meet your auto-enrolment obligations as an employer, you will be subject to penalties and possibly to prosecution.

How much it will cost

• employer contributions will start at 1.5% of gross pay
• in year 4 they will increase to 3%
• in year 7 they will increase to 4.5%
• in year 10 they will increase to the maximum rate of 6%
• contributions will be fixed and employers won’t be able to contribute less than the set rate

Steps to consider

Familiarise yourself with the legislation: Review the auto-enrolment legislation applicable to Ireland to understand the requirements, deadlines, and specific provisions.

Pension Provider: It is crucial to select a pension provider that can facilitate auto-enrolment for your employees. It might be worth consulting with your current provider or if you do not have one in place - select a qualifying pension scheme.

Assess workforce eligibility: Determine which employees will be eligible for auto-enrolment. This may involve considering factors such as age, earnings, and length of service.

Set up employee opt-out procedures: Establish procedures and guidelines for employees who wish to opt out of the auto-enrolment scheme. This should include providing the necessary opt-out forms and ensuring compliance with legal requirements.

Train staff: Educate relevant personnel within the organisation, such as HR staff and payroll administrators, on the auto-enrolment process, employee communication, and handling opt-outs.

Communicate with Employees & update policies:

It is expected that additional guidance will be available for employers regarding the governance of auto-enrolment later this year once the legislation is introduced. It may be worth awaiting further guidelines before actioning some of the steps above.

The experienced team at MSS as aways are available to answer any question and provide support.