Auto-enrolment pension scheme to be up and running by 2024

Under the plan, some 750,000 workers, aged 23 to 60 who earn over €20,000, will be automatically enrolled in a private pension scheme, with the State adding a top-up of €1 for every €3 put in by workers

Social Protection Minister Heather Humphreys announced the approval of the General Scheme of the Automatic Enrolment (AE) Retirement Savings System Bill. Picture: Leah Farrell/RollingNews.ie

The Government has approved a bill to introduce a long-awaited auto-enrolment pension scheme.

Social Protection Minister Heather Humphreys announced the approval of the General Scheme of the Automatic Enrolment (AE) Retirement Savings System Bill, which has now been to the Joint Oireachtas Committee on Social Protection for Pre-Legislative Scrutiny.

It is envisaged the bill will be introduced to the Oireachtas in early 2023, with the scheme up and running in 2024.

Under the plan, some 750,000 workers, aged 23 to 60 who earn over €20,000, will be automatically enrolled in a private pension scheme through a new agency called the Central Processing Authority at the beginning of 2024.

It will see employers and employees match contributions, with the State adding a top-up of €1 for every €3 put in by workers. So, for example, a €3,000 yearly contribution by an employee would see €3,000 added by employers and €1,000 by the State.

Contributions to the pot will be made based on a percentage of gross salary and will build up over a decade.

In the first three years, employees and employers will put in 1.5% of the worker's salary into the pot, with the State adding 0.5%. This will rise to 3%, 3%, and 1% in years four to six; 4.5%, 4.5%, and 1.5% in years seven to nine, and 6%, 6%, and 2% beyond year 10.

'Opt-out' basis

A key feature of the system is that although participation is voluntary, it operates on an ‘opt-out’ rather than an ‘opt-in’ basis. 

There will be options to leave the scheme, or contributions can be paused in the event of job loss. It is understood the fund will also offer investments at different levels of risk.

The agreement of the bill marks the first time the long-mooted idea has come this far. 

Ms Humphreys said it was a "generational change" to pensions in Ireland.

People are living longer and healthier lives and through auto-enrolment, I want to ensure they can enjoy their retirement years with some financial security. 

"I know for many people retirement seems a long way away and they think they have a lot of time before they need to think about a pension. Pensions are complicated and so we all tend to put it on the long finger.

“It will combat pension inertia by turning the present system on its head to one where people will have to consciously opt out of supplementary pension coverage rather than opting in.

"It is intended not just to get people saving earlier but to support them in that saving process by simplifying the pension choices and importantly by providing for significant employer and State contributions as well.”