A brighter future ahead as pension reforms start to take shape
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of Aon Ireland outlines significant changes in Ireland's pensions landscape and looks at actions that can help people optimise their retirement finances
The pensions landscape is changing before our eyes. From a new system of auto-enrolment to changes in the state pension, a number of important changes are creating a more resilient system that can effectively support Ireland’s employees into the future.
Pension plans may not be top of mind for most young professionals when entering the workforce in their early to mid-twenties. However, with auto-enrolment now set to be introduced from September 30, 2025, young employees face important choices about pension coverage even at this early stage of their career.
The pension auto-enrolment system is a significant step forward in addressing current inequities and ensuring the next generation have savings for their retirement. Ireland is currently the only OECD country without AE or an equivalent to promote pensions savings, with around 800,000 workers without a private pension.
With people living longer and facing greater levels of expense in retirement, auto-enrolment is an important step forward in increasing the financial security of all future retirees. Anyone without a pension scheme who earns more than €20,000 per year and is aged between 23 to 60 will be automatically signed up on the new system.
For employers who do not currently provide a private pension, the new system provides a straightforward means of providing a workplace pension. The scheme will see matching contributions from employers (starting at 1.5%) and a top up from the State at a rate of €1 for every €3 saved by the employee.
The new system can contribute to closing the gender pensions gap in Ireland which currently stands at around 35% according to the ERSI. While more than half of men receive a private pension, less than one in three women receive the same benefit.
Findings from Aon’s pension auto-enrolment report, published earlier this year, show that the majority of businesses (64%) in Ireland believe that the new legislation can support reducing the gender pension gap. However, the proposed system is not perfect, and additional measures should now be considered to further address the gender pensions gap, such as more flexible contribution models.
While pension auto-enrolment will bring a new generation of savers into the pension safety net, employees with the option of enrolling in either a private company scheme or AE, will face decisions about the type of scheme that best meets their needs. Private schemes will often match employee contributions to a higher rate than that offered by pension auto-enrolment, particularly in the early years of the scheme.
This means that by the age of 40, in the middle of their career, an employee enlisted in a private scheme may have accumulated a larger pension pot, compared to those in the auto-enrolment scheme.
Education will be crucial to explaining the benefits of each pension model. Research shows that understanding of pensions and auto-enrolment among workers remains limited. Less than one in five Irish nationals are aware of the auto-enrolment scheme and what is to come, according to the CSO.
Employers have a key role to play in informing and advising their employees around the new system, private pension schemes and establishing long-term savings habits. Clear communications can enhance employees’ understanding of the merits of different schemes and find the option that work best for them. As workers reach the later stages of their career, discussion should focus on the importance of increasing contribution levels to achieve financial security in retirement.
Financial tools that show the projected value of pension pots based in current contributions also have an important role to play. These can help workers understand future income and better prepare for retirement.
As workers near retirement age, they can better assess whether part-time work, or other flexible working arrangements are suitable options for them, or if they need to continue working.
With much change ahead, Ireland’s pensions landscape is transforming for the better. We have a unique opportunity to create a fairer and more equitable pensions system that is sustainable for decades ahead. By working together we can successfully manage this transition and implement a more resilient pensions system that is fit for the future.
At Aon Ireland, our team of expert advisors stand ready to support businesses around the country to make better decisions on their pensions journey and deliver better outcomes for their people into the future.