Auto-Enrolment Pension in Ireland

In order to secure a financial future, starting a pension is one of the smartest financial decisions you can make.
 
But what is best, to wait to be included in the upcoming Auto Enrolment or to set up an Occupational Pension?
 
Auto-Enrolment is due to be rolled out during the second half of 2024 and is for employees aged between 23 & 60 who are earning a salary of €20,000 or more. If these employees have no other pension arrangement in place, they will automatically be enrolled to this scheme with employers required to facilitate auto enrolment through their payroll.
 
The Auto-Enrolment is a Defined Contribution arrangement with contributions being paid by the employee, the employer, and the State. There are set contributions to be paid and there will be no flexibility with this. Contributions will increase every three years as follows.
 
Year       Employee Contribution       Employer Contribution       State Contribution
1-3                   1.5%                                                1.5%                                       0.5%
4-6                   3%                                                  3%                                          1%
7-9                  4.5%                                               4.5%                                       1.5%
10 +                   6%                                                  6%                                         2%
*Employer and State Contributions are capped at €80,000 salary.
 
The Auto-Enrolment scheme offers only four investment choices and will run up to State Pension age with no access to funds prior to this.
 
Although it is of course welcome that more people in Ireland will now have a pension in retirement, it must be understood the employees included in the Auto-Enrolment will not avail of the same benefits available from an Occupational Pension. An Occupational Pension can be open to all employees with no strict criteria to be included. This gives you the opportunity to include  employees in a pension now ensuring that they do not lose out on valuable time and savings ahead of their retirement.
 
An individual occupational pension gives  employees more flexibility in terms of how much they want to contribute, a wider range of investment choices become available to them with the added benefit of financial advice.
 
Under an occupational pension members have the option of taking their benefits from age 50 and move their existing pensions to new employments if required.
 
For contributions made by the employee, into an occupation pension, they can avail of tax relief at their marginal tax rate, and this is extremely beneficial for employees within the 40% tax bracket.
 
It is important for employers to seek advice to satisfy future obligations in terms of pension provisions under the traditional route by setting up an occupational pension scheme or employer sponsored PRSA. 

Contact us to discuss the impact Auto-Enrolment can ahve on your company and your employees.