12 Jun Pension Auto Enrolment

Understanding Ireland’s New Pension Auto-Enrolment Scheme: A Quick Guide for Employers

With auto pension enrolment now finally due to commence on January 1, 2026 after a number of delays, the auto-enrolment pension scheme & Fund (My Future Fund) is designed to boost pension participation among private sector workers who, at present, might otherwise rely solely on the State Pension.

Employers who have not already started planning for the implementation of the Scheme now need to do so as a priority, with a number of areas such as payroll systems, employment contracts and employee communications to be reviewed, in order to ensure a successful roll-out.

What Is the Auto-Enrolment Scheme?

Auto-enrolment is designed to systematically bring employees into a pension savings plan if they aren’t already a part of one and which will complement the State Pension.

Eligible employees, aged between 23 and 60, who are earning over €20,000 per annum and not currently enrolled in any pension scheme will be automatically enrolled.

This process is managed by the National Automatic Enrolment Retirement Savings Authority (NAERSA), reducing the administrative burden on employers.

Contributions by employees, employers, and the State will be combined to form a savings pot, that follows employees from job to job, based on a ‘pot-follows-member’ system.

Employees will be able to access their account via an online Portal and will be able to view account balances, contributions and investment returns as well as to update information or suspend their payments.

Contribution Levels

Contributions will be gradually phased in over 10 years as follows:

Year	Employee	Employer	State
1-3	1.5%	1.5%	0.5%
4-6	3%	3%	1%
7-9	4.5%	4.5%	1.5%
10+	6%	6%	2%

Employer and state contributions are capped at a salary level of €80,000.

Employee contributions will be taken from net income, after deductions of income tax. PRSI and USC.

Tax relief does not apply in respect of these contributions but instead the Government will top up the Pension Fund at 33% of the employee contribution.

Opting Out

Employees may choose to opt out of the Scheme or suspend their participation after 6 months membership.

Employees who opt-out will be auto -enrolled again after 2 years have elapsed and may then opt out again alter a further 6 months in the Scheme.

If an employee opts out, they will receive a refund of their own contributions, but the employer and state contributions will remain in their Pension pot.

Employees will also be able to pause paying contributions after six months of participation, for a period of up to 2 years.

Investment Funds

Employees will have a choice of 4 retirement savings funds, subject to the level of risk they are comfortable carrying, with a default option provided if an employee does not express a preference.

Employer Responsibilities Under the New Scheme

• Identification and Contribution Collection:

While NAERSA will handle the identification of eligible employees using Revenue payroll data, employers remain responsible for making timely contributions on behalf of their employees. These contributions are collected via payroll systems and must adhere to the set contribution rates.

• Administrative Monitoring:

Employers will be provided with an online portal by NAERSA to track payment deductions and monitor contributions, ensuring compliance with regulatory standards.

• Employee Compliance

It is an employer’s duty to ensure that employees understand their involvement in the scheme. This includes informing them about their rights, including the 6-month mandatory participation period before they can opt out, as well as future adjustments to contribution rates.

Effectively Communicating with Employees

Clear and transparent communication is vital to ensure a smooth transition into the auto-enrolment system. Here are some key points to address during internal communications:

• Explain the Rationale

Let employees know that the scheme is being implemented to provide them with a secure retirement plan. Explain the benefits of having state-backed assistance in building their pensions and how this will support them in the long run.

• Outline Eligibility and Enrolment Process:

Clarify who qualifies for auto-enrolment and detail the process: employees will be automatically enrolled based on set criteria, and they will have a 6-month waiting period before opting out if they choose. Explain that once enrolled, contributions from all parties will generate savings that are portable between jobs.

• Transparency in Contributions

Provide employees with a clear breakdown of the contribution structure. Let them know how much is deducted from their salaries, what percentage of the contribution comes from the employer, and how the State top-up works.

Penalties for Non-Compliance

Should employers fail to adhere to the necessary contributions, there are penalties and possible legal repercussions. Employers now need to start planning and communicating with their employees if they have not already done so.