Employers who 'behave badly' over pension scheme will be 'chased down'

Employees who are not already involved in an occupational pension scheme, who are between the ages of 23 and 50 and earning €20,000, will be automatically enrolled as part of the act.

Employers who try to force or dissuade their workers out of the newly-planned auto-enrolment pension scheme could face “sanctions, penalties, and prosecutions”, an Oireachtas committee has heard.

Officials from the Department of Social Protection addressed TDs and senators on the scheme which is due to start from January 1, and said employers who “behave badly” and try to reclassify workers to avoid paying pension contributions would be “chased down”.

Assistant secretary at the department, Tim Duggan, said: “There are also provisions within the auto-enrolment act to discourage employers from behaving in a way that would coerce or seek to persuade employees from not engaging in auto-enrolment.”

In the works for nearly a decade, auto-enrolment pensions will see all employees not already in an occupational pension scheme or similar arrangement, between the ages of 23 and 60 and earning €20,000, automatically enrolled in one. Similar schemes operate in Britain, Australia, and New Zealand.

Those who are auto-enrolled can opt out if they so wish, and can opt for higher or lower-risk retirement savings strategies within the scheme.

The scheme, dubbed ‘My Future Fund’, will be phased in over a decade. In the first three years, both employers and employees will contribute 1.5%, before it rises in increments to 6% by year 10. At the same time, the State will top up each person’s savings pot by €1 for every €3 they contribute.

Mr Duggan said the rising incremental contributions will make it easier for employers to absorb the cost of contributing to the scheme, which comes at a time when many businesses are facing pressure on their costs from a variety of factors.

“We’ve had extensive engagement with all of these [business groups] over the last couple of years,” Mr Duggan said.

“Explaining the system, outlining the implications for them, and hearing those concerns that this is an additional cost.

“I’ve acknowledged it is an additional cost, but equally, over time, the cost impact of it will dissipate considerably. Over the next 10 years, wage inflation is going to be massively in excess of 6%.

“I’ve never seen a 10-year period where it hasn’t been, so this is just an element of that wage inflation that’s going to occur.”

On lessons learned from other jurisdictions, the committee heard that many countries made the amount people would pay into these pensions too low. This is why the Irish scheme would gradually increase the contributions.

Mr Duggan said: “Ask any of the designers or operators of these schemes, they’ll tell you it’s the biggest mistake they made. They’ve a big problem with it now in the UK, 13 years in.

“In Australia, they took the view at the beginning they had to invest in low-risk conservative funds. The consequence of which is people didn’t make any money in their pension pots.”

In terms of the planned January start date, Mr Duggan acknowledged that payroll providers and employers had said it would be “more helpful” than the now delayed September 2025 start date.

He added that a communications campaign to make workers aware they may see a reduction taken from their payslips from January if they have been auto-enrolled will be ramped up in the coming months.