The introduction of a Statewide auto-enrolment (“AE”) pension system has been on the cards in Ireland since 2006, when the then Minister for Social and Family Affairs first published AE proposals. Despite being on the Government’s to do list since the mid-2000’s, the introduction of AE has picked up significant pace over the last 12 months. 

When will AE be introduced?

It is currently anticipated that AE will be introduced in Ireland in the latter half of 2024. Heads of Bill were published in October 2022. The Automatic Enrolment Retirement Savings System Bill is listed for priority publication in the Government’s Spring 2024 Legislative Programme. Pre-Legislative Scrutiny was completed in June 2023. Minister for Social Protection, Heather Humphreys stated, at the National Pensions Summit, that the terms of the legislation itself will be published in March 2024, and begin its passage through the Oireachtas immediately thereafter. The legislation has not been published to date but it is understood the Minister will seek Cabinet approval for the draft legislation on Wednesday 27 March 2024.

Have any other steps been taken towards AE?

The Minister has made a number of public statements in recent weeks on AE.  She has stated that 2024 is going to the year AE is delivered with the first enrolments expected by the end of this year. Based on statements from the Minister it is understood that the tender process for the pensions administrative service to run the AE system is well advanced, and the ‘pre-qualification process’ is already complete, resulting in a shortlist of candidates. The Minister stated that this means there will be a provider in place in the coming months as the Government works towards the launch of the AE scheme itself later this year. In addition, it is also understood that a procurement exercise for investment management services is at an advanced stage of development.

Should employers take any action now?

There are some preliminary steps which employers can take. Employers will need to consider the make-up of their workforce, how many employees are currently in an existing pension arrangement and how many are not. Whether the AE system is appropriate for their employees or whether an existing occupational pension scheme should be used to enrol employees as an alternative to the AE system.  For some, a hybrid approach of running both systems may make sense. Employers should also determine a budget for the cost of contributions depending which system is chosen.

Depending what decisions an employer makes on this front and when legislation is available, a review of contracts of employment and existing pension scheme rules will likely be needed. In addition, employers who do not currently automatically enrol employees into their pension scheme will also need to adapt their payroll systems either to cater for increased contributions to their pension scheme or to remit contributions to the AE scheme.

Will AE just apply to new employees?

AE applies to all existing staff and new staff which includes staff on probation and casual and part-time staff.  If an employee is currently enrolled in a “qualifying occupational pension scheme” into which the employer and employee are actively making contributions, they are excluded from the AE system. The Minister will prescribe by regulation what criteria a qualifying occupational pension scheme must satisfy and it seems likely that this will require some form of equivalence assessment.

What is AE in Ireland likely to look like?

We have set out below a high-level summary of some of the expected features of AE based on the current draft of the Heads of Bill for information:

• the scheme was originally proposed to operate on an opt-out basis for all workers between 23-60 who earn more than €20,000 per year and who are not currently a member of an occupational pension scheme. Workers outside of those criteria would have been able to opt-in to the scheme under the original proposals;
• contribution rates (based on a percentage of gross income) will be introduced on a phased basis:

AE+	Employee	Employer	State
Years 1 – 3	1.5%	1.5%	0.5%
Years 4 – 6	3%	3%	1%
Years 7 – 9	4.5%	4.5%	1.5%
Years 10+	6%	6%	2%

• it is not currently proposed that additional voluntary contributions (AVCs) will be facilitated under the scheme;
• there will be a range of four investment funds available to members to invest their funds, depending on their risk appetite, there will be a default option for members who do not express a preference;
• employers will be required to facilitate payroll deductions for members of the scheme;
• employees who move jobs will not have to change scheme and will be able to bring their pension pot with them;
• the date of drawdown is likely to be aligned with the State pension age;
• a new Central Processing Authority (CPA) will be established to administer the scheme; and
• the tax system proposed in relation to AE is different to that which currently applies to occupational pension schemes (it is more aligned with the SSIA savings arrangement). This means that AE would appear to be more beneficial for low-medium earners and the current occupational pension scheme system more beneficial for those on the higher rate of tax. This may result in employers having to operate a two-tier pension system themselves.

Will there be any changes to this design?

It is possible that there will be changes to the design of AE set out above when the draft legislation is published and indeed further changes may be made as the draft legislation makes its way through the Houses of the Oireachtas. It is likely that we won’t know the final form of the scheme until the draft legalisation is finalised and passed by both the Dáil and Seanad.

Where can I find out more about AE?

To keep up to date, you can subscribe to our mailing list here. Once you have signed up you will receive updates from the Arthur Cox Pensions Team on any developments on the roll out of the AE system over the course of this year.