What the Auto Enrolment Pension scheme means for employers.
The auto pension enrolment scheme has been introduced by the Irish Government to counteract the fact that 40% of Irish People are not saving enough for their pension and intend relying solely on their state pension in retirement. The auto enrolment scheme aims to bring in a system whereby all employers would enrol their employees into a workplace pension scheme and contribute towards the employee pension pot. The full details are still being finalised and it is hoped the process will begin in the next few years. Auto enrolment was intended to be introduced at the beginning of 2021, however it’s now looking like it will be rolled out in 2023. This date could be extended yet again as the full details for auto enrolment are still being ironed out by the government.
During the phased roll out of auto enrolment, employees will be required to make initial minimum default pension contributions of 1.5% of their qualifying earnings, increasing by 1.5 percentage points every 3 years thereafter to a maximum contribution of 6% at the beginning of year 10.
Employers will be required to make matching (tax deductible) pension contributions on behalf of the employee at the specified contribution rate to help fund their retirement. This means that employees, employers and the State will each contribute to the member’s account.
Employees between the ages of 23 and 60 who earn €20,000 or more per annum (across all employments) will be automatically enrolled into a pension scheme with no waiting period. All employees outside of these criteria may opt in themselves. Mandatory auto enrolment requirements won’t apply to any employee who is already a member of a pension scheme, provided the scheme meets certain minimum standards.
Automatic enrolment will be an earnings-related workplace savings system where employees will retain the freedom to opt out if they wish.
If you are a business who employs at least one employee, the auto enrolment law is likely to affect you and your employees.
It’s important that employers understand what they need to do and prepare early. Employers should educate themselves on auto enrolment and familiarise themselves with the terminology. Businesses may need to plan and consider the one-off costs to set up an auto enrolment pension scheme, as well as the ongoing cost of paying money into the scheme and managing the process.
If you are a new business and employing staff for the first time after auto enrolment is introduced, your legal duties for automatic enrolment will begin on the day your first member of staff starts work. We are happy to provide guidance and support to ensure that businesses comply with auto enrolment.
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