Minister Heather Humphreys has confirmed that auto-enrolment will be up and running in 2024. Auto-enrolment is a new retirement savings scheme for employees and is due to commence in the second half of 2024. The Minister confirmed that a person can only have one pension pot. She noted that the two schemes cannot “run in parallel” which means that an employee will be able to either avail of auto-enrolment or a private pension, but not both. Employers will need to decide if they should enter the new scheme or obtain a flexible traditional occupational pension scheme.
Employers will need to prepare and consider which approach they will take once auto-enrolment comes into operation. Traditional schemes offer tax relief and have greater flexibility for Additional Voluntary Contributions (AVC) where as auto-enrolment operates under a more rigid structure. Employees who pay no tax or are taxed within the lower rate of 20% may benefit from the state subsidy under the auto-enrolment scheme, which works out at effect relief at the rate of 25%.
Employees who do not have a pension scheme, earn more than €20,000 per year and are aged between 23 and 60 will be automatically enrolled into the new system. People earning less than €20,000 per year and those who are aged outside the 23-60 bracket will be able to opt in, if they aren’t already in a pension scheme. Every €3 contributed by an employee will be matched by their employer, with an additional State top up of a further €1. The employer and State contributions will be capped on an upper annual earnings threshold of €80,000 per year across all employments.
Auto-Enrolment will be a net deduction from the employees’ wages and will be run from a centralized Government scheme but as, yet we do not have any details on the arrangements. The scheme was due to start on 1st January 2024 but has been deferred to later in the year to enable the organization to be set up.
Employers who decide to avail of the auto-enrolment scheme will be responsible for recording and managing the data related to their participating employees. There will be a Central Processing Authority who will be responsible for most of the administration work for auto-enrolment system.
The administration of the more traditional occupational pension schemes is usually handled in full by the pension provider.
If you wish to discuss any of the above Quintas will love to hear from you.