The Minister, Heather Humphreys for Social Protection has announced Automatic Enrolment Retirement Saving System for Ireland and has laid the details of the final design principles. It was stated that Ireland is the only country that doesn’t yet operate on Auto Enrolment or any similar system related to pension savings. There are around 750,000 workers who do not have a private pension and are wholly reliant on the state pension when they get old. This means that the workers will have to lower their standard of living and adjust to a pension of over €250 a week.
However, there are many employees who aren’t aware or are slow to enrol in pension schemes as their employers do not offer their own pension scheme. To make a commandment, the Government is making it compulsory for all employers to establish a worker’s pension scheme that will be co-funded by the State. So, when the worker commences their work, they would be automatically signed up for Auto Enrolment Pension Scheme.
This scheme will be up and running by 2024 to encourage workers to participate in the pension saving system. For every €3 saved by the worker, the State will provide a top-up of €1. A further of €4 will be invested by the employer and the State. The motto of the Automatic Enrolment Retirement Saving System is to make sure that all the employees who do not have any occupational pension plan can avail of this scheme’s benefits. The employers will be required to match the employees’ contribution to their salary while the State will make a top-up contribution. With the new auto-enrolment scheme, the employees who don’t have any private pension will have an extra income on retirement.
Where will the employees’ money be saved?
The money saved by the employee will be invested in stocks, government bonds, commodities and commercial properties through a so-called “MANAGED FUND”. In this pension scheme, an employee is given the option to choose from 4 managed funds with various levels of potentials, risks and returns.
KEY POINTS TO NOTE
- There are approximately 750,000 workers to be enrolled on the new pension scheme
- Workers can opt out of this scheme as participation in this scheme is optional
- €4 will be credited to the worker’s pension saving account for every €3 saved by the worker
- A total fund of €293,000 will be accumulated for a fully established worker over the working life if his per annum income is €35,000
- A culture of saving for retirement can be established says Minister Heather Humphreys
To gain further knowledge about the pension scheme in Ireland, please visit page on Payroll services. and consider subscribing to our newsletter via email.