Understanding Auto Enrolment: What You Need to Know

Introduction to Auto Enrolment

Auto Enrolment (AE) is a new government-initiated retirement savings scheme launching in January 2025. Governed by the Auto Enrolment Retirement Savings Bill 2024, this initiative aims to bolster retirement savings by automatically enrolling eligible employees.

How AE Works

Employees over 23 years old and earning over €20,000 annually will be automatically enrolled in the AE Retirement Savings Scheme. Contribution rates start at 3% of earnings in 2024, gradually increasing to 12% by 2034.

The Role of Government

The government sets the legislative framework and oversees AE's implementation and administration. It also offers a state top-up of 33% of employees' contributions, differing from the tax relief in current Defined Contribution (DC) plans.

Comparison with Existing Pensions

While DC plans and master trusts offer more flexibility, tax benefits, and options like early retirement and once-off contributions, the AE scheme has a more rigid contribution structure and lacks these features.

Employee Impact

AE affects take-home pay more due to the absence of tax relief on contributions. Additionally, it doesn’t allow for once-off contributions or early retirement, which might be a drawback for some employees.

Incentives and Criteria

The state top-up is a unique incentive in the AE scheme, but fixed criteria for inclusion present practical challenges for implementation.

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