LAST UPDATE | 29 Mar 2022

CABINET HAS APPROVED the auto-enrolment pensions plan which will see those who earn more than €20,000 automatically signed up to make contributions for their retirement fund.

The automatic enrolment scheme is a new savings and investment scheme for employees which will see the State and employers contribute towards employee pensions.

Approximately 750,000 employees who are aged between 23 and 60, earning over €20,000 across employments, and who are not already enrolled in an occupational pension scheme will be affected.

Auto-enrolment was initially meant to start this year but due to the pandemic the roll out was delayed.

The scheme is now set to come into effect in January 2024, with final infrastructure to be in place in late 2023.

• Read more here on how you can support a major Noteworthy project to find out if Irish pensions are contributing to the climate crisis.

The plan is being brought in due the pensions time bomb coming down the line due to not enough people having an occupational or supplementary pension for when they retire.

Following Cabinet approval of the scheme this morning, Social Protection Minister Heather Humphreys said that the legislation to underpin the scheme can now be drafted, with intentions to have this brought forward this year.

The Minister for Social Protection, Heather Humphreys says Cabinet has approved the final design of the Automatic Enrolment Retirement Savings System for Ireland. pic.twitter.com/pjWdBlCGlG

— Christina Finn (@christinafinn8) March 29, 2022

The long-promised pension system will see contributions paid by employees being matched by their employers as a percentage of the employee’s gross income.

The State will top-up the rest.

Speaking to reporters this afternoon, Humphreys said that for every €3 put into the pension pot by an employee, employers will put €3 in while the State put in €1.

“This means for every €3 are a person saves your employer and the State combined will add €4 meaning a total of €7 will be invested into your pension pot.”

The rates of contribution will be phased-in gradually over a decade as follows:

                        Employee                         Employer                     State
Years 1 – 3         1.5%                                   1.5%                            0.5%
Years 4 – 6         3%                                     3%                               1%
Years 7 – 9         4.5%                                  4.5%                           1.5%
Year 10 +           6%                                     6%                               2%

“This steady pace again allows time for both employers and employees to adjust to the new system,” Humphreys said.

Under the new scheme, Humphreys says that employees will be able to opt-out after six months if they do not want to contribute to their pension. 

If people opt-out, they will be removed from the scheme for two years before they are automatically re-enrolled and must wait an additional six months before they can opt-out again.

If they do opt-out, workers will receive their payments back, while both employer and state contributions to their pension will remain in the pot.

“This is because at the heart of the AE (auto-enrolment), it’s about changing the culture around pension savings. It’s moving it towards one where a person has to consciously choose not to save for retirement,” Humphreys said.

“For many people retirement seems a long way away and they think they have a lot of time before the need to think about a pension. That process of putting aside a little each week to provide for the retirement years is something to be considered next year. It’s always on the long finger.

“The truth is the best time to start saving for a pension is always now.”

The State pension will remain in place and that it will be the “bedrock” of the new pension scheme, said Humphreys.

“The state pension is the bedrock of the system. We’re committed to the state pension,” Humphreys said.

“This [auto-enrollment] will be in addition to the State pension.”

Employer contributions and the State top-up will be capped at a maximum €80,000 of an employee’s gross salary.

Employees may contribute on earnings greater than €80,000 if they wish.

Humphreys said that the aim of the scheme is to make the complicated pension market simpler for both employees and employers.

There will be four different funds where people can place their savings, including one default medium risk fund. The remaining three are a conservative fund, another medium risk fund and one high risk fund.

Ireland is currently the only Organisation for Economic Co-operation and Development (OCED) country that does not have an auto-enrolment pension system.

Additional reporting by Tadgh McNally

Making a difference

A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation.

For the price of one cup of coffee each week you can make sure we can keep reliable, meaningful news open to everyone regardless of their ability to pay.

Support us Learn More