Employee Auto Enrolment Considerations

I have spoken to a number of employees recently who are contributing to a company pension or PRSA. It's an employee contribution, so it's their own contribution only.

Many are wondering if they would be better off switching to the Auto Enrolment Government Scheme to receive an employer contribution.

Today I'd like to share a few considerations...

The Auto Enrolment Goverment Pension will start a 1.5% employer and 1.5% employee contribution, plus the government top up.

It will start at 1.5% and incrementally increase to 6% after 10 years.

Now, there's no scope to contribute more than the set rate, which will start at 1.5%.

So, as a pension contribution, 1.5% employer and employee contribution as a starting point likely isn't enough.

In the current pension system, if you're in your 40s, you can contribute up to 25% of your gross pay, capped at €115,000.

There are different funding allowances for different ages, but that's an example. This is a significantly greater amount of funding than you do to the current pension system.

In the Auto Enrolment system, the contributions will come from your net pay, which is your " after-tax" pay.

So, at 1.5%, it may not be an issue, but at 6%, it could become more of an issue.

Finally, with the Auto Enrolment system, I don't believe that there will be any support on hand to review your pension, make sure it's optimized, and project for it to see if it'll be enough for your retirement.

If Auto Enrolment is something you need clarity on, feel free to get in touch, my contact details are below in the comments??