You might be wondering what auto-enrolment is, how it is different from the State Pension and how it affects you as an employer?
Auto-enrolment is a new retirement savings scheme for employees which is being introduced by the government to cover ‘the pension gap’. Its planned to start on 30th September 2025 when employees will be automatically enrolled in the scheme provided they meet certain criteria – they must be aged between 23 and 60 and earn more than €20,000 annually.
The scheme is being introduced to ensure greater pension coverage for employees. Many of whom do not have a pension and intend on relying solely on the State Pension when they retire.
What Do Employers Need To Do?
There are a few things that you can do to get ready for auto-enrolment.
1. Register with National Automatic Enrolment Retirement Savings Authority
In advance of the new scheme known as ‘My Future Fund’ commencing, employers will be asked to register with the NAERSA and set up a variable direct debit for the payment of contributions. This will be facilitated on an online portal which will open later this year.
2. Understand the Scheme
– Auto-enrolment applies to employees age between 23 to 60, earning between €20,000 and €80,000 annually who are not already in a qualifying pension scheme.
– Employers must match employee contributions on a set scale – starting at 1.5% of gross salary in year 1 and increasing incrementally to 6% of gross salary in year 10.
3. Assess Workforce Eligibility
– Review your workforce to identify eligible employees who will be automatically enrolled.
– Employees can opt out after a minimum contribution period but will be re-enrolled every two to three years unless they opt out again.
4. Budget for Employer Contributions
– Plan for the financial impact of phased employer contributions, which will increase over time. Include these costs in your annual budgets.
5. Evaluate Existing Pension Schemes
1. If you have a pension scheme in place already ensure it meets the new requirements. Non-compliant schemes may need to be reviewed or replaced.
2. You may have employees who are not enrolled in your existing scheme. Decide if you wish to add them to your existing scheme now.
3. You also need to consider the ‘waiting period’ for your existing pension scheme. If using your current pension scheme you may wish to reduce your waiting period so new employees can join.
6. Upgrade your Payroll Systems
– Ensure your payroll system can handle auto-enrolment requirements – calculating contributions and processing payments to the Central Processing Authority. Closer to the time it is likely that Payroll Software Companies will update their software to facilitate this.
– Alternatively you may wish to outsource payroll.
7. Employee Communication and Engagement
– Put clear communication in place explaining how the scheme works and its benefits to your employees. You will need to explain contribution rates and opt-out options. Under the auto-enrolment legislation, employers will need to inform employees directly when they have been enrolled.
8. Update HR Policies and Contracts
– You will need to revise employment contracts and handbooks to reflect auto-enrolment participation and obligations.
– Train HR teams to manage compliance requirements on opt-outs and re-enrolments etc. Your company will need to liaise with the National Automatic Enrolment Retirement Savings Authority (NAERSA) for ongoing compliance and reporting requirements. Non-compliance may result in penalties and reputational damage!
9. Seek Independent Advice
– Consult with a Pensions Adviser to choose the most appropriate solution for your company. A one-size-fits-all may not be the best solution for your company and employees.
Click on the link for more information in relation to the new scheme – gov.ie – Auto-enrolment retirement savings system for employees
