As you may have heard there are plans to introduce auto enrolment to pensions for employees in Ireland. So what does this mean?
Essentially once it is fully implemented it means that employees will have up to 6 per cent of their gross pay deducted and put into an occupational pension.
The mandatory pension scheme is being introduced to address the issue of a high level of workers who have no pension plan in place and plan reply solely on the state pension. Just 35 per cent of the private sector workforce has private pensions coverage.
Under this proposal, the Department of Employment Affairs and Social Protection suggests that all PAYE workers between the ages of 23 and 60 earning more than €20,000 will be automatically enrolled in a pension in 2022 if they are not already signed up to a scheme.
They would pay 1 per cent in the first year, a figure that will rise by one percentage point every year until 2027 when they would be contributing 6 per cent.
The contributions would be matched by their employer up to a salary of €75,000 and the State would contribute €1 for every €3 saved by the scheme member.
In this scenario, from 2027, workers would see a total of 14 per cent of their gross pay going into a fund for their retirement.
Employees, under the proposal, would choose from among four registered providers, selected by a new Central Processing Authority, to manage their pension and select the level of risk they wish to accept. Management charges for the funds would be limited to 0.5 per cent of funds invested. If they don’t choose a provider, one would be allocated to them.
Employers will need to ensure they are able to facilitate the proposals and once the proposals are definitive we will be working with our clients to ensure compliance in this regard.
If you have any questions on auto enrolment please do not hesitate to contact us.