Pension Auto-Enrolment in the Republic of Ireland
The Republic of Ireland will introduce a pension auto-enrolment scheme beginning January 2025. This initiative aims to increase pension savings among employees who meet specific criteria. Below, we outline the key features of this upcoming scheme to help employers and employees understand their obligations and benefits.
Criteria for Auto-Enrolment
The new auto-enrolment scheme applies to employees who meet the following conditions:
- Threshold: Employees must earn at least €20,000 annually. If an employee holds multiple jobs, the combined income from all employments will be considered to determine eligibility.
- Age Range: The scheme is for employees aged 23 to 60.
- Pension Scheme Participation: Employees who are already part of another pension scheme, with contributions processed through payroll, are not eligible to join the auto-enrolment scheme, even voluntarily. For those with multiple employments, only one employer needs to auto-enrol the employee.
Contribution Calculations
Gross Salary Basis: Contributions are calculated based on the employee’s gross salary. The contribution calculation will apply to the first €80,000 of the employee’s earnings, regardless of higher income.
Contribution Rates: The contribution rates will progressively increase over time as follows:
| Year 1 to 3 | Year 4 to 6 | Year 7 to 9 | Year 10+ |
| 1.50% | 3% | 4.50% | 6% |
Example based on an employee earnings €20,000 per year:
| Employee Yearly contribution | Employer Yearly contribution | State Yearly top-up | Total Yearly contributions | |
| Year 1 to 3 | € 300.00 | € 300.00 | € 100.00 | € 700.00 |
| Year 4 to 6 | € 600.00 | € 600.00 | € 200.00 | € 1,400.00 |
| Year 7 to 9 | € 900.00 | € 900.00 | € 300.00 | € 2,100.00 |
| Year 10+ | € 1,200.00 | € 1,200.00 | € 400.00 | € 2,800.00 |
Opt-Out and Administrative Details
– Opt-Out Option: Employees can opt out during the first six months of enrolment. During the initial ten years of the scheme, an additional two-month opt-out window is available (months 7 and 8).
– Centralised System: The scheme will be managed by the National Automatic Enrolment Retirement Savings Authority (NAERSA). Employers will not need to choose or manage pension scheme providers directly. NAERSA will handle employee assessments using revenue data, contribution collections, and allocations.
– NAERSA Portal: Both employers and employees will have access to a portal provided by NAERSA. This portal will offer comprehensive information on pension plans, and options for employees to opt out, suspend, or voluntarily join the scheme.
Key Points for Employers
– No Waiting Period: Unlike the UK’s system, Ireland’s auto-enrolment scheme does not have a waiting period before employees are enrolled. The only delay will be administrative (time for the data to be collected by Revenue to assess the employee).
– Mandatory Initial Contributions: Contributions will be mandatory for the first six months, with a refund option available during months seven and eight if the employee opts out.
– Administrative Impact: If implemented as planned, the auto-enrolment scheme should not significantly increase the administrative burden on employers.
– Budget Planning: Employers need to budget for the auto-enrolment contributions and prepare for this change.
– Communication: It is crucial for employers to communicate with their employees as soon as Revenue confirms the official start of the scheme.
– Fixed Contribution Rates: Initially, contribution rates are fixed, and neither employees nor employers can increase their contributions.
– Tax Relief: Employers can claim tax relief on corporation tax for their contributions to the auto-enrolment scheme.
Summary:
The pension auto-enrolment is coming sometime next year, and a seamless adoption will depend on the payroll software’s ability to deliver the necessary integration for implementation. If everything goes according to plan, the administrative burden for running the scheme will not be substantial, especially compared to the similar UK scheme, which is more complex and relies more on business actions.
It is important for each business to become familiar with the scheme, budget for the increase in social costs, and inform employees as soon as the information from the Irish government becomes clear and official.
From the payroll provider’s perspective, we will keep clients updated and be vigilant in informing them of any relevant changes that could risk compliance with this new legislation in the Republic of Ireland.