Workplace pension auto-enrolment draft legislation goes to Oireachtas committee

New pension rules, affecting around 750,000 workers initially, on course for 2024 introduction, Minister says

Moves to automatically enrol workers in a new occupational pension scheme have moved a step closer after the Government approved draft heads of new legislation on the issue.

The general scheme of the Automatic Enrolment (AE) Retirement Savings System Bill will now be examined by the Oireachtas Joint Committee on Social Protection before the final wording of a law introducing the new regime is published.

About 750,000 workers will initially be enrolled into a new workplace pension scheme under the rules proposed with this number growing over time.

Under auto-enrolment, workers between the ages of 23 and 60 who are earning more than €20,000 a year and are not already in a workplace pension scheme will automatically be signed up to the scheme in 2024 when it is expected to be formally introduced.

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They will be able to “opt out” after six months but those who do will be automatically enrolled again two years later.

Workers and their employers will initially pay 1.5 per cent of their gross salary into the scheme. From year four, that will increase to 3 per cent, rising again to 4.5 per cent in year 2030 and 6 per cent from 2033.

The State will contribute €1 for every €3 paid in by the employee. As a result, every €3 contribution from the worker will see a total of €7 invested in their pension once employer and State contributions are factored in.

The employee contribution will be measured as a proportion of the worker’s gross income before tax but the amount will be taken from their after tax income.

The Minister said the announcement marked historic progress on the delivery of an automatic enrolment system in Ireland. It comes 15 years after then social welfare minister Seamus Brennan committed the State to such a scheme in 2007.

The Department of Social Protection says the new system is “designed to simplify the pensions decision for workers and make it easier for employers to offer a workplace pension”. However, the State contribution is lower than that on offer for many workers in current workplace pension schemes.

‘Firmly on the tracks’

“The delivery of auto-enrolment has been a key priority for me since my appointment as Minister for Social Protection,” Heather Humphreys said on Monday. “Earlier this year I published the final design principles for the Automatic Enrolment Retirement Savings System for Ireland. Since then, a lot of work has been undertaken in progressing its implementation. This includes the drafting of the Heads of Bill which I am pleased to say have now been approved by Government.

“After decades of talking about auto-enrolment in this country, I am pleased to say the AE train is now very firmly on the tracks and leaving the station ahead of its introduction in early 2024,” she added, calling it a “historic milestone”.

She said she hoped to introduce an Automatic Enrolment Bill “as soon as possible following completion by the Committee of their work”

“People are living longer and healthier lives and through AE I want to ensure they can enjoy their retirement years with some financial security.

“I know for many people retirement seems a long way away and they think they have a lot of time before they need to think about a pension,” Ms Humphreys said. She said auto-enrolment would “combat pension inertia” by forcing people to opt out of the arrangement rather than opt in.

“It is intended not just to get people saving earlier but to support them in that saving process by simplifying the pension choices,” she said.

Dominic Coyle

Dominic Coyle

Dominic Coyle is Deputy Business Editor of The Irish Times