The following elements of the new pension auto-enrolment pension scheme have been settled in principle by Government:
Eligibility/Ability to opt-out
All private sector workers aged between 23 and 60 years of age, who earn more than €20,000 per year will be automatically enrolled into the new scheme unless they are existing member of a pension scheme.
Those outside the eligibility criteria (for example, those earning below €20,000 or those aged under 23 or over 60 years of age) will be able to ‘opt-in’ to the scheme if they so wish. Membership of the new scheme will be compulsory for the first six months. Thereafter, members can choose to ‘opt-out’. Members who choose to opt-out will receive a refund of their own contributions paid up to the point of opt-out.
Members will be automatically reenrolled after two years but will have the ability to opt-out again under the same circumstances as outlined above. The option to optout will only exist in the first ten years of membership and thereafter members will be able to suspend payment of contributions but they will not be entitled to a refund of their contributions - instead the contributions will remain in the pot.
Contribution Levels
The new scheme will see contributions paid by employees being matched by their employers and the State will also add a top-up to the money paid into the scheme.
Contributions to the scheme will be introduced on the following a phased basis:
|
Years |
Employee (as % of salary[1]) |
Employer (as % of salary1) |
State (as % of salary1) |
|
Years 1 - 3 |
1.5% |
1.5% |
0.5% |
|
Years 4 – 6 |
3% |
3% |
1% |
|
Years 7 – 9 |
4.5% |
4.5% |
1.5% |
|
Year 10+ |
6% |
6% |
2% |
The scheme will be capped at €80,000 of an employee’s gross salary but people earning above that amount can still make additional contributions to the scheme. However, employers will not be required to match the amount.
Accessing funds
It is proposed that there will be a limited ability for members to access their accumulated retirement savings with only serious illness being considered as grounds to do so.
Administration and Investment
A Central Processing Authority (CPA) will be established to administer the scheme. This body will do much of the administrative work and act in a custodianship capacity for participants.
The pension contributions will be invested by four registered providers, and there will also be four different investment portfolios available for members, depending on their risk appetite. It is envisaged that there will be an online portal where members will be able to review the size of their pension pot.
Drawdown
It is expected that drawdown of pension benefits will be aligned with the State Pension age.
Penalties for Employers failing to implement
Employers who fail to implement auto-enrolment scheme for its employees or fail to deduct and remit contributions will face administrative penalties initially, and ultimately risk prosecution as a criminal offence.
