Auto-enrolment is the new Pensions saving scheme being introduced by the Government. It has been the subject of much debate over the last few years, with many doubting whether it will be implemented at all.
A pension is the most tax efficient way of saving for your retirement so any form of savings you put into your pension now, will give you a greater income on retirement. We know there is the state pension, but for most, this would not be sufficient to maintain their current standard of living.
It’s important to remember, when you retire, your wages completely stop so how could you afford to live your life on no money coming in?
So, why is it being introduced?
Ireland is the only country in the OECD that does not yet operate this pension scheme or a similar system. It has been on the cards for years now, with the current Government seemingly very keen on implementing it as soon as possible.
Auto-enrolment will be ran through an Administrator called The National Automatic Enrolment Retirement Savings Authority or NAERSA for short. They will act as the caretaker of the employee’s savings. (source:www.gov.ie)
They will also determine who is eligible for the scheme using Revenue payroll data. They will have an online portal for employees to manage different aspects of their pension (contributions, opt-in, opt-out etc..).
Some basic criteria for employees to be auto enrolled are:
1) They must be aged between 23 and 60
2) They must be earning €20,000 or more per annum across ALL employments
3) They must not have existing pension in place through their employments
The last point above is particularly important for Employers who already have private pension schemes in place. Once Revenue can see pension deductions coming from a payslip, the employee will not be auto enrolled into this pension scheme.
It is important as an Employer to discuss auto-enrolment with a Financial Advisor now to ensure you and your employees are best advised before this comes into effect. Auto-enrolment may be the best option for your staff and may provide them with the most suitable pension plan given their salaries. However, if you have the majority of your employees on the higher rate of tax, then a private pension scheme would be the best option.
