Extra cost of pension auto-enrolment will impact our services, charities warn

Workers will see a pension contribution automatically deducted from their salary and transferred to a retirement savings account. File photo

Charities have warned budgets for key services will be hit by auto-enrolment pension rules which begin on January 1.

The new scheme will see all workers earning over €20,000 aged between 23 and 60 who do not have pension coverage signed up to the Government's scheme.

This will see a pension contribution automatically deducted from their salary and transferred to a retirement savings account. There will be a requirement for employers to match the contributions, as well as a top-up from the State.

However, section 38 and 39 charities, largely funded through the State, have said the obligations to them, which in some cases reach hundreds of thousands of euro, could impact services.

In a paper on the impact of the changes, the Disability Federation of Ireland (DFI), and the National Disability Services Association (NDSA) warned funding is "essential" for the pension obligations of the sector. 

'Significant additional costs'

It added there is an average of 36 employees per organisation not currently in pension arrangements but who will be eligible for auto-enrolment come January 2026. For one larger organisation, the number of staff not currently in a pension arrangement is just under 700.

It will mean "significant additional costs associated with auto-enrolment" with one large employer from the groups' memberships saying their 2026 budget will be hit by around €1.3m of extra costs, with increasing costs as employer contributions increase.

The paper says the disability voluntary sector "cannot be expected to implement it without funding to do so".

"This is a government-mandated measure applied to employers delivering State services, with no commercial levers to generate additional income."

A spokesperson for Rehab told the Irish Examiner that "while auto-enrolment will create additional costs for all organisations, our position is clear: we do not intend to cut services as a result of its introduction".

However, it is essential that funders recognise that auto-enrolment introduces new, unavoidable costs across the entire sector, and appropriate funding adjustments will be needed to ensure that service levels can be maintained nationally.

A spokesperson for Enable Ireland said its funders are aware of the challenges and it will "seek to find a resolution" to deficits.

A spokesperson for the Department of Social Protection said MyFutureFund applies to all organisations, "public and private and regardless of size or structure, and they are required to facilitate the auto-enrolment scheme". 

They added that complying with auto-enrolment legislation is a legal obligation which means that all eligible employees must be enrolled and that all contributions are accurate and on time.

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"Allocations or grants to section 38/39 companies is a matter between these companies and their respective funding body," the spokesperson added.

The HSE, which funds a number of organisations, said it will be gathering data in the coming months. 

It said staff of voluntary bodies funded by the HSE under section 38 are "considered public servants and typically already members of an occupational pension scheme" while many Section 39 staff "are already part of occupational pension schemes or have a personal pension via payroll deductions".