Earlier this month, The Department of Social Protection announced the publication of the Auto-Enrolment Bill 2024, which will pave the way for approximately 800,000 workers to be brought into a retirement savings scheme co-funded by the employer and the State. Starting in 2025, employees aged between 23 and 60, who earn over €20,000 per year, and who are not already paying a pension, will be automatically enrolled. Employees will contribute 1.5% of their gross earnings, which will be matched by their employer and topped-up by the State.

Matching contributions will be made on a one-for-one basis to those contributions made by employees up to a maximum of 80,000 earnings. In practice, for every €3 put in by an employee to their retirement pot, €7 will be added (€3 from the employer and €1 from the State). These rates will gradually increase every three years until reaching a maximum contribution rate of 6% per employer, plus 2% from the State from 2034 onwards.

In this month’s discussion on the legislative burden, Dermot Coates acknowledged the administrative and financial burden imposed on businesses by auto-enrolment in pensions schemes. According to the department’s report, the new system is predicted to surpass all recently enacted labour legislation in terms of having the biggest and most acute impact on businesses. The impending implementation of the scheme requires businesses to strategise for the significant changes ahead.

Conducting cost-benefit analysis and updating internal processes are critical steps in preparing for the transition. Government support will be essential in aiding employers with existing pension schemes to manage the transition smoothly, ensuring timely compliance with the new regulations.

Further detailed information on the new Auto-Enrolment Bill can be found here.