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It has been a long road, with many false dawns, but the government have advised that auto enrolment (AE) pensions will finally kick off in September 2025. Under the scheme, the employee, employer, and Government all pay a certain amount into the employee’s pension fund.

A new public body, the National Automatic Enrolment Retirement Savings Authority, will be set up to administer the Auto-enrolment scheme. Tata Consultancy Services (TCS) have been appointed to build and run the system for auto-enrolment. TCS also administer the UK auto enrolment scheme.

If you are a business owner, and already have an existing pension scheme in place for your employees you will not be required to provide an AE pension scheme for them. At the moment, the government have indicated that existing pension scheme arrangements will not have to follow the rules, and funding requirements, for another seven years. 

So, what is AE and what are the rules around it?

AE Scheme Overview

Main Objective: the main objective of AE pensions is to increase pension coverage in Ireland by automatically enrolling eligible employees into a pension scheme.

Eligibility: Employees aged between 23-60, who earn €20,000 or more annually.

Contributions Levels

Years 1-3: Employer (1.5%) + Employee (1.5%) + Government Top-Up (0.5%) = Total (3.5%)
Years 4-6: Employer (3%) + Employee (3%) + Government Top-Up (1%) = Total (7%)
Years 7-9: Employer (4.5%) + Employee (4.5%) +Government Top-Up (1.5%)=Total (10.5%)
Year 10 onwards: Employer (6%) + Employee (6%) + Government (2%) = Total (14%)

Retirement Age: 66 (aligned with the State pension age). You cannot retire before the age of sixty-six. 

Investment Fund Options: Four appointed investment managers offering low, medium, and high-risk funds. The four investment managers have not been appointed; however, two likely candidates include Blackrock and Vanguard. 

Impact on Employers
It is important to note that if you are a company director (class S) you will not be brought under the AE scheme regime. If an employer does not have an existing pension in place for their staff, AE makes it mandatory for employers to contribute to employee pensions. Employers can choose to enrol employees solely in the AE Scheme or establish their own scheme. Establishing a separate employer-sponsored scheme can offer  greater control over scheme design, flexibility in contribution rates, and potential cost savings through tax benefits.

Taxation 
AE's government top-up equates to 25% tax relief, is less beneficial for higher-rate taxpayers compared to the marginal tax relief offered in employer schemes. There is no tax relief available under the AE rules, the government just tops up your contribution. For example, if you made a personal contribution of €167 to a private pension (outside of an AE pension scheme) this would cost €100 net after 40% tax relief. It should also be noted that AE does not allow for Additional Voluntary Contributions (AVCs). Private employer schemes can facilitate AVCs, allowing employees to boost their retirement savings if they wish. Finally, while the new auto enrolment scheme should be welcomed, one potential issue for members is the fixed retirement age of sixty-six. This may not suit everyone, and some flexibility around the retirement age would make the scheme more attractive.