Auto Enrolment is a retirement savings scheme which, if implemented, will be mandatory for all employees between the ages of 23 and 60, earning over €20,000 per annum who do not already contribute to a workplace pension. Launching in 2022 on a phased basis, it is expected that the government will incentivise the scheme by contributing €1 for every €3 saved by the employee.
According to the government only 35% of Irish private sector employees have a supplementary pension, which means that a significant percentage of the population will not have the adequate savings necessary to sustain their pre-retirement standard of living into old age. The concern is that the pension system in its current form is not sustainable and requires significant reform in order to meet the long-term demands of the working population. Auto Enrolment is one of the measures outlined in the Government’s “Roadmap for Pensions Reform” which sets out the actions required to overhaul the approach to providing for pension income in retirement.
To minimise the potential increased administrative burden on employers when implementing Auto Enrolment, the Government has announced there will be supports available during the roll-out phase. Employers will be responsible for enrolling their employees into the scheme, and for remitting the pension contributions to a state-run ‘Central Processing Authority’ (CPA), although there are currently no plans to involve employers in the selection of their employees’ Registered Provider or savings fund option. Employers will have to match their employees’ contributions (up to 6% of pensionable pay, with a ceiling of €75,000) and their contributions will be deductible for corporation tax. According to the “Strawman Proposal”, penalties will be levied on employers who fail to implement the scheme, which could lead to prosecution for repeat offenders.
Under the current proposal, employees can choose a preferred savings option from a range of Registered Providers, however, those who do not exercise this choice will be provided with a fund and provider by default. Although employees will be enrolled automatically, they will be permitted to opt-out at the end of a minimum period, which is currently proposed to be “during the 7th and 8th month of membership” (read the Strawman Proposal for more details). Importantly for employees, there will be a facility to transfer their account between employments.
Based on the latest information, employers will be required to:
At EisnerAmper Ireland, our dedicated outsourced payroll team combines in-depth knowledge of the Irish payroll landscape with market leading software to create solutions to meet our clients’ unique requirements. We leverage this expertise to support employers through all phases of Auto Enrolment, from initial implementation to the deduction and reporting of employee contributions.
Learn more about our outsourced payroll services here.