The landscape of pensions in Ireland is undergoing a significant transformation with the impending introduction of the Auto Enrolment Retirement Savings System. As we navigate through these changes, new updates have emerged, providing more clarity and some additional considerations for both employers and employees.

Latest Developments in Auto Enrolment: March

  • Expected Bill Publication: An Auto-Enrolment Bill is expected to be published in March or shortly thereafter. While the government is optimistic about implementing AE this year, life companies predict an early 2025 commencement.
  • Eligibility Criteria: AE will affect employees aged 23-60 earning €20k and above. Those already making pension contributions, whether through employee-only, employer-only, or combined plans, are exempt.
  • Year One Decision: Employees will be automatically enrolled, with option to ‘opt out’ within the first year.
  • Payroll Integration: Onboarding into AE will be managed through company payroll systems.
  • Contribution Structure: Contributions will start at 1.50% from both employee and employer, with the state contributing €1 for every €3. These contributions will gradually increase to 6% over a 10-year period.
  • Taxation and Contributions: There will be no tax relief on employee contributions. However, employer contributions will receive corporation tax relief. Contributions will be a percentage of gross salaries, with employee contributions deducted from net wages (confirmation needed).
  • Exclusion of Self-Employed: The self-employed will not be included in AE.
  • Salary Cap: Contributions will be based on a percentage of gross salary up to a maximum of €80k.
  • Tax Relief Issues: AE may not be optimal for those paying tax at the marginal 40% rate, as it offers an effective tax relief of approximately 25%.
  • Probation Periods and Immediate Enrolment: The handling of probation periods in relation to immediate enrolment under AE is still unclear and potentially complex.
  • Employer Responsibilities: Employers are expected to undertake significant ‘heavy lifting’ in terms of implementation, learning, and administration.
  • Investment Options: No life company has yet been appointed to provide investment funds for AE. Options will likely be limited, based on a Lifestyle strategy, with risk levels adjusted according to age. There may also be ‘Low, Medium, and High risk’ alternatives.

Implications for Employers and Employees

These updates indicate a more nuanced approach to AE, with implications for both employers and employees. Employers, in particular, will need to understand the intricacies of AE, including the payroll integration and the nuances of contributions and tax relief. Employees, especially those in higher tax brackets, will need to evaluate the suitability of AE compared to other pension options.

Given these complexities and the evolving nature of AE, it’s crucial for businesses and individuals to stay informed and prepared for the changes ahead.

Need Expert Guidance on Auto Enrolment?

For detailed advice and assistance in navigating the Auto Enrolment landscape, contact FJ Hanly & Associates. Our team is equipped to provide you with the latest information and support to make the transition as smooth as possible.

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