Heather Humphreys reveals details of automatic enrolment pension scheme
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Around 800,000 workers are to be enrolled into a new retirement savings scheme which will come into effect from early next year.
Social Protection Minister Heather Humphreys has announced details of the Automatic Enrolment Retirement Savings System Bill 2024.
She said the bill, which will shortly be brought to the Oireachtas, is “one of the biggest reforms of the pension system in the history of the State".
Some 800,000 paid employees are without an occupational or private pension, leaving them with only the State pension to rely on after retirement.
Under automatic enrolment, all employees will have access to a workplace pension savings scheme combining contributions from their employer and the State.
Employees aged between 23 and 60 years who earn over €20,000 per year and who are not already paying into a pension scheme will automatically be enrolled in the system.
It will operate in a similar way to the former SSIA system where contributions made by the employee were matched by the employer and topped up by the State.
For every €3 added by the employee, their employer will also contribute €3 along with a €1 contribution from the State.
Contribution rates will be phased in over a 10-year period.
Starting in 2025, employees will contribute 1.5% 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 6% per employee, 6% per employer, and 2% from the State from 2034 onwards.
Ms Humphreys praised the imminent scheme.
“This landmark legislation is about protecting our workers and, particularly, our young people when it comes to reaching their retirement years,” she said.
“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.
“We’ve been an outlier in terms of pension coverage for too long, and that’s now going to change."
Ireland is currently the only country in the Organisation for Economic Co-operation and Development (OECD) without a similar system to promote pension savings.
“We know that people are living longer and that is good news but the changing demographics mean that a lot of pressure is coming on the State pension and we have to find ways of supplementing it in the future,” Ms Humphreys said.
“The State pension is the bedrock of our pension system and it’s here to stay but automatic enrolment will give workers in the future that bit extra in terms of income to support good living standards.
"According to figures from the Central Statistics Office, only one-third of private sector workers have supplementary pension coverage. I want to change this.
“Without auto enrolment, many retirees could suffer an unwanted reduction in their living standards when they retire.”
Participants will have the choice 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.
The bill will also allow for the establishment of a new State body, namely the National Automatic Enrolment Retirement Savings Authority.
The organisation will administer the scheme and act as a buffer between participants and the financial investment companies tasked with growing their savings. Collecting contributions, arranging for the investment of contributions, and managing participant accounts, to be made accessible through an online portal, will be among the authority’s roles.