Automatic enrolment pension legislation to be published

Automatic enrolment pension legislation to be published

New legislation on automatic pension enrolment will end Ireland’s status as an international “outlier”, the government has said.

The Automatic Enrolment Retirement Savings System Bill 2024, which will shortly be brought to the Oireachtas, will pave the way for around 800,000 workers to be brought into a pension scheme for the first time.

Social protection minister Heather Humphreys said: “This represents one of the biggest reforms of the pension system in the history of the State, and is an important milestone in supporting people in their retirement years.”

Under automatic enrolment, all employees will have access to a workplace pension savings scheme which is co-funded by their employer and the State.

Upon being enacted, employees aged between 23 and 60 years old who earn over €20,000 per year and are not already paying into a pension scheme will be automatically enrolled.

In a similar way to the old SSIA system, contributions made by the employee will be matched by the employer and topped up by the State.

In practice, for every €3 put in by the employee, the employer will also contribute €3 and the State will contribute €1. That means for every €3 an employee puts in, they will receive a pot of €7.

Contribution rates will be phased in gradually over a period of 10 years. Starting in 2025, employees will contribute 1.5 per cent of their gross earnings, which will be matched by their employer, and topped-up by the State.

These rates will gradually increase every three years until reaching a maximum contribution rate of six per cent per employee, six per cent per employer, plus two per cent from the State from 2034 onwards.

Mrs Humphreys said: “This landmark legislation is about protecting our workers, and particularly our young people, when it comes to reaching their retirement years.

“Automatic enrolment has been talked about for decades, and today is a clear sign that we mean action. This legislation will provide the foundation for the most radical shake up of the pensions landscape in Ireland for generations.

“For me as minister, having 800,000 workers without pension coverage isn’t acceptable or viable. We’ve been an outlier in terms of pension coverage for too long – and that’s now going to change.

“This is a hugely important piece of legislation in terms of protecting workers’ future and I look forward to bringing it before the Oireachtas immediately after the Easter recess.”

Participants in the scheme will be allowed to opt-out or suspend their contributions after a mandatory six-month participation period. They will be brought back into the system again after two years unless they have an alternative pension arrangement.

In order to encourage workers to participate, people who choose to remain in the system will have their pension savings matched on a one-for-one basis by the employer. The State will also provide a top-up of €1 for every €3 saved by the worker. This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined.

It is estimated that a worker on the national average wage contributing consistently for 40 years could build up a savings pot of nearly €750,000, including investment returns, over the course of their working life.

The bill also provides for the establishment of a new State body, the National Automatic Enrolment Retirement Savings Authority (NAERSA), to administer the scheme and act as a buffer between participants and the financial investment companies who will be tasked with growing their savings.

The Authority will act in the best interests of participants, collect contributions, arrange for the investment of contributions, manage participant accounts that will be accessible through an online portal, and facilitate the payment of savings at retirement.

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