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Introduction of Auto-Enrolment pension scheme in Ireland

What are the changes?


The Automatic Enrolment Retirement Savings Systems Act 2024 was published in July 2024 along with an FAQ document for employees and employers. The Act provides for the establishment of a new retirement saving scheme for qualifying employees who are not already members of an occupational pension scheme.

The Act itself does not provide for a commencement date but it was expected to be introduced from 1 January 2025. However the Government announced on 1 October that this will be introduced on 30 September 2025.

This legislation provides for the introduction of an independent public body, the National Automatic Enrolment Retirement Savings Authority (NAERSA), to administer the scheme. It also sets out the qualifying conditions for the enrolment and re-enrolment of employees, levels of contributions and penalties for non-compliance.

Under the Act, an individual will be auto enrolled in the scheme if:

  • They are aged between 23 and 60;
  • They are not in an ‘exempt employment’; and
  • Their gross pay is €20,000 or more in a year (pro-rated for pay periods that are more or less than one year). Gross pay in this context includes allowances and non-cash benefits. 

An ‘exempt employment’ is one where an employee or employer makes contributions via the PAYE system to any of the following qualifying schemes: 

  • An occupational pension scheme;
  • A Personal Retirement Savings Account (PRSA);
  • A Retirement Annuity Contract (RAC);
  • A Pan-European Personal Pension Product (PEPP).

An ‘employee’ is any person in receipt of taxable earnings through the PAYE system and an ‘employer’ is any person paying taxable earnings through the PAYE system to an employee.

Most employers and employees will be familiar with occupational pension schemes, PRSAs and RACs. A Pan-European Personal Pension Product (PEPP) is a contract-based product between an individual and the provider of the product in the form of an investment account. PEPPs are of a similar nature to PRSAs.

Once the NAERSA determines that an employee meets the conditions for enrolment, they will issue a notice of enrolment to the employer. The employer is required to notify the employee with penalties applying to the employer for failure to do so.

On receipt of the enrolment notification, the employer is required to calculate the level of employee contribution due, deduct it from the employee and remit payment of this to the NAERSA along with the employer contribution. Interest is payable at a daily rate of 0.0274% per date on any amounts underpaid.

The act details a number of offences each carrying significant penalties. These include failure to pay any contributions when they fall due and making false statements for the purpose of evading or reducing the amount of employer contributions due.

Employee and employer contributions are due together with a contribution from the State. The levels of contribution are as follows:

Contribution years

Participant contribution rates

Employer contribution rates

State contribution rates

1 to 3

1.5%

1.5%

0.5%

4 to 6

3%

3%

1%

7 to 9

4.5%

4.5%

1.5%

> 9

6%

6%

2%


An upper annual limit of €80,000 applies to earnings with no contributions being required on earnings in excess of this limit. There is no tax relief on employee contributions so these will be deducted from the net pay of the employee. However, the State’s contribution is regarded as compensation for this.

The legislation provides for the repayment of contributions in specific circumstances such as where the wrong rate was applied or the basis for determining employee qualification is incorrect.

The FAQ document confirms that under the scheme, employers will be required to make a separate return through payroll directly to the NAERSA. Information on how this process will work and frequency of reporting will be made available closer to the go-live date

Employees aged over 18 and under the pensionable age of 23 who are not in an exempt employment may apply to the NAERSA to join the scheme. Employers are expected to treat these opt-in employees in exactly the same way as auto-enrolled employees.

Participants can apply in writing to opt-out of the scheme once 6 months has passed from the enrolment date. There is a 2-month window for the opt-out decision to be made. Thereafter the 2- month window to opt-out is available every 3 years from the original opt-out date up to the 9th anniversary of the original opt-out date.

Employees under pensionable age and not in an exempt employment will be automatically re-enrolled 2 years after the opt-out date and notification of this will be issued by the NAERSA to both the employee and the employer. The employee can again opt-out from the scheme, subject to the above timeframes.

Individuals that opt-out of the scheme can seek a repayment of their contributions subject to certain limitations.

The Employer’s FAQ states that directors who are self-employed for PRSI purposes are not eligible to contribute to the scheme.

Our view

Employers need to act now to ensure they are prepared for the increased cost and administrative actions required as a result of the Act. In particular, employers need to ensure:

  1. They consider current pension arrangements and whether they want to encourage increased participation existing schemes to minimise administration;
  2. There is a process in place to communicate the operational aspects of the scheme to employees;
  3. There are robust processes for managing enrolment notifications from NAERSA ensuring these can be sent to employees in a timely manner and that the employer and employee contributions due can be calculated and paid on or before the employee’s pay date;
  4. That appropriate processes are in place to manage the flow of information needed to operate the scheme such as the tracking of enrolment / re-enrolment dates and employee opt-in / opt-out requests and the accurate monitoring of rates of payment; and
  5. That budgets account for the increased costs of auto-enrolment, including both the employer contributions and the administration costs of operating the scheme.

The Act provides that there will be standards drawn up for recognised occupational pension schemes, PRSAs, trust RACs and PEPPs. We would expect that these standards will set out minimum contribution rates to ensure that contributions by employers and employees to such schemes are not below the levels of contributions required under the auto-enrolment scheme.

We would advise employers who are currently considering putting in place occupational pension schemes for their employees to take appropriate steps now to get this approved scheme in place before the end of 2024 if possible.

Unfortunately, there are still some significant open questions for both employers and employees which are not addressed by the Act. These include:

  • What are the circumstances in which an employee can choose to suspend their contributions?
  • What exemptions are available for individuals who are working in Ireland on temporary assignment from abroad and who already contribute to occupational pension schemes in their home country? Conversely, what exemptions are available for employees of Irish entities who are sent on secondment abroad and who are required to make compulsory pension contributions in their host country?
  • What options are available for employee and employer contributions where an employer sets up a qualifying occupational pension scheme, PRSA or RAC requiring mandatory employee contributions at a date after the employee has been auto-enrolled into the scheme but before an opt-out date arises?
  • Will the scheme have any impact on the calculation of the Increased Exemption and SCSB reliefs on termination payments?

It is hoped that the publication of regulations on the operation of the scheme will provide further clarity on the open matters relating to Auto Enrolment Scheme. The expected date of publication of these regulations has not been confirmed.

If you would like to discuss this scheme in more detail, please feel free to reach out to your usual Deloitte contact.

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