Press release
Minister Humphreys announces the publication of landmark legislation for the Automatic Enrolment Retirement Savings System
From Department of Social Protection
Published on
Last updated on
From Department of Social Protection
Published on
Last updated on
The Minister for Social Protection Heather Humphreys has today announced the publication of the Automatic Enrolment Retirement Savings System Bill 2024.
The Bill, which will shortly be brought to the Oireachtas, will pave the way for around 800,000 workers to be brought into a retirement savings scheme for the first time.
In announcing the publication of the Bill today, Minister Humphreys said:
“This represents one of the biggest reforms of the pension system in the history of the State, and is an important milestone in supporting people in their retirement years.”
At present, around 35% of private sector workers in the State have no occupational or private pension meaning they will be solely reliant on the State Pension when they retire.
Under Automatic Enrolment , employees will have access to a workplace pension retirement scheme which is co-funded by their employer and the State.
Upon being enacted, employees aged between 23 and 60 years old, who earn over €20,000 per year, and who are not already paying into a pension scheme, will be automatically enrolled.
In a similar way to the old SSIA system, contributions made by the employee will be matched by the employer and topped up by the State.
In practice, for every €3 put in by the employee, the employer will also contribute €3 , and the State will contribute €1.
That means for every €3 an employee puts in, €7 will be added to their retirement savings pot.
Contribution rates will be phased in gradually over a period of 10 years.
Starting in 2025, employees will contribute 1.5% of their gross earnings, which will be matched by their employer, and topped-up by the State.
These rates will gradually increase every three years until reaching a maximum contribution rate of 6% per employee, 6% per employer, plus 2% from the State from 2034 onwards.
This steady phasing-in allows time for employers to budget and plan and for employees to adjust to the new system.
Announcing the publication of the Bill, Minister Humphreys said:
“This landmark legislation is about protecting our workers, and particularly our young people, when it comes to reaching their retirement years.
“Automatic Enrolment has been talked about for decades, and today is a clear sign that we mean action.
“This legislation will provide the foundation for the most radical shake up of the pensions landscape in Ireland for generations.
“For me as Minister, having almost 35% of private sector workers without pension coverage isn’t acceptable or viable.
“We’ve been an outlier in terms of pension coverage for too long – and that’s now going to change.
“This is a hugely important piece of legislation in terms of protecting workers’ future and I look forward to bringing it before the Oireachtas immediately after the Easter Recess.”
The goal of Automatic Enrolment is to increase pension coverage and pension adequacy in Ireland.
Ireland is the only country in the OECD that does not yet operate this or a similar system as a means of promoting pension savings.
A key feature of such systems is they operate on an ‘opt-out’ rather than an ‘opt-in’ basis.
Participants will be allowed to opt-out or suspend their contributions after a mandatory six-month participation period. They will be brought back into the system again after two years unless they have an alternative pension arrangement.
In order to encourage workers to participate, people who choose to remain in the system will have their retirement savings matched on a one-for-one basis by the employer. The State will also provide a top-up of €1 for every €3 saved by the worker. This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined.
It is estimated that a worker on the national average wage contributing consistently for 40 years could build up a savings pot of nearly €750,000, including investment returns, over the course of their working life.
The Bill also provides for the establishment of a new State body, the National Automatic Enrolment Retirement Savings Authority, to administer the scheme and act as a buffer between participants and the financial investment companies who will be tasked with growing their savings. The Authority will act in the best interests of participants, collect contributions, arrange for the investment of contributions, manage participant accounts that will be accessible through an online portal, and facilitate the payment of savings at retirement.
Minister Humphreys continued:
“We know that people are living longer and that is good news.
“But the changing demographics mean that a lot of pressure is coming on the State Pension and we have to find ways of supplementing it in the future.
“The State Pension is the bedrock of our pension system and it’s here to stay.
"But Automatic Enrolment will give workers in the future that bit extra in terms of income to support good living standards.
“According to figures from the Central Statistics Office, only one-third of private sector workers have supplementary pension coverage. I want to change this. Without auto enrolment many retirees could suffer an unwanted reduction in their living standards when they retire.”
The Minister added:
“It is imperative that we take this initiative now while we have the opportunity.
“We have been talking about introducing a new workers’ pension for decades and we are finally on the brink of achieving it.
“With the support of my colleagues in the Dáil and the Seanad, I intend to bring this legislation to enactment as quickly as possible, and the first workers enrolled in January 2025.”
All employees not already in an occupational pension scheme or equivalent, aged between 23 and 60 and earning over €20,000 across all of their employments, will be automatically enrolled.
With the first enrolments set to happen at the start of 2025, the introduction of Automatic Enrolment will be very gradually phased in over a decade, with both employer and employee contributions starting at 1.5%, and increasing every three years by 1.5 percentage points until they eventually reach 6% by Year 10 (2034). This steady phasing allows time for both employers and employees to adjust to the new system.
Matching contributions will be made by employers to those contributions made by employees up to a maximum of €80,000 of earnings. This recognises the value employers gain through their employees having additional security in retirement and assists employees with the cost of accumulating pension savings.
The State will also top up contributions by €1 for every €3 saved by the employee, up to a maximum of €80,000 of earnings. This is in addition to the €3 that will also be contributed by the employer.
This means that for every €3 saved by an employee, a further €4 will be contributed to their retirement savings pot by their employer and the State – that is every €3 contribution by an employee automatically grows to €7 before it is invested.
These employer and State contributions will incentivise people to stay in the Automatic Enrolment system and will reduce the cost to individuals of saving for retirement.
The system will be voluntary but will operate on an ‘opt-out’ rather than an ‘opt-in’ basis.
Eligible employees will be automatically enrolled/‘opted-in’ but will have the choice after six months’ mandatory participation to opt-out or suspend participation.
Employees will have a range of three retirement savings options to choose from at a higher, medium and low risk investment strategy.
Employees who do not make an active choice will be placed in a default investment strategy on a ‘lifecycle’ basis, moving them from the higher to the medium to the lower risk fund in accordance with their age as they approach retirement.
Administrative costs and burdens are to be kept to an absolute minimum for both employers and employees through the establishment of the National Automatic Enrolment Retirement Savings Authority, which will administer the system.
Employers will not have to invest in the establishment or procurement of an occupational scheme for their own businesses. They will simply be required to facilitate payroll deductions.
Importantly, people moving between jobs will not have to change pension scheme or join a new scheme. They will remain members of the Automatic Enrolment scheme on a ‘pot-follows-the-member’ basis.
Services will be provided and supported through an easy-to-use online channel where participants will see their savings pots grow quickly and substantively.