THE GOVERNMENT ANNOUNCED today that it has approved the creation of a new pension system which will see all workers aged 23-60 earning over €20,000 automatically enrolled on a retirement savings scheme.
With only 35% of private sector workers putting money away in a private pension, this system of automatically enrolling people is designed to help workers begin to put away money for when they retire.
Anyone who meets the criteria and is not already enrolled in a workplace pension scheme will be automatically added.
Under the system due to begin in 2022, employers will be required to match the contribution made by an employee towards their pension. The government’s contribution, however, is still under consideration.
Everyone who’s auto-enrolled will have to stay enrolled for at least six months. After this, they can opt out if they so wish.
The minimum contribution will be 1.5% every three years, which will increase by 1.5% every three years to a maximum of 6% by year 10.
Minister Regina Doherty said: “While the State Pension will always be there for people, I want to ensure that the pensioners of tomorrow – all those in the workplace today – don’t just have enough to live but have a comfortable life in their retirement.”
She said that the government had looked at similar systems elsewhere, and decided that an employee’s contribution will be collected in the same “pension pot” and this won’t change even when they change jobs.
The finalised version of the plan comes after a lengthy consultation process, the government said.
A new State agency called the Central Processing Authority will also be set up to source providers to offer a suite of retirement savings options.
Reacting to the news, Fianna Fáil TD Willie O’Dea said the announcement was welcome, but its delivery was key.
“I am concerned about several issues including the lack of an early draw-down option to access funds for a mortgage deposit. The key design elements announced today need to be scrutinised in full,” he said. “Furthermore, the target date of 2022 is ambitious given the amount of work that still needs to be done on developing this system and preparing employers and employees alike for this change.”
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