• AM Financial

What is Pension Auto-Enrolment ? AM Financial explains

Updated: Mar 28, 2021

So, what is the “Strawman” proposal ?

It is a discussion document released by the Government setting out how an auto-enrolment pension system might work.

The system is aiming to add support to the State pension and is aimed primarily at those who are not in a pension yet. The idea had been to start in 2022 but after Covid, this looks like it will be delayed.

Who will be included ?

All private sector employees between the ages of 23 and 60 and earning over €20,000 per annum and without existing pension will be automatically enrolled.

Others will be able to opt-in but will not be automatically enrolled. It will be possible for anybody to opt-out.

Why is this being done ?

Ireland is one of only two OECD countries without a mandatory, earnings-related component to retirement saving.

Currently only 35% of private sector employees have a pension. There is an over-reliance on the State Pension which will be insufficient for many.

Who pays ?

The employee begins by contributing 1% of salary and this increases by 1% each year – up to a maximum of 6%.

This contribution is matched by the employer (up to a ceiling of €75,00 employee earnings).

Also, the government propose to contribute €1 for every €3 of the employee.

In the future, a maximum of 14% of salary could be going into the pension plan every year = 6% from employee + 6% from employee + 2% from government.

What if I move jobs ?

A new state body, the Central Processing Agency (CPA), will manage the process. The employee keeps his pension with the CPA even as his employer changes.

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