Government publishes Auto Enrolment Retirement Savings System Bill 2024 

The introduction of Ireland's new automatic enrolment (AE) retirement savings system took a significant stride forward today with the publication of the much-anticipated Auto Enrolment Retirement Savings Bill 2024. 

The new Auto Enrolment (AE) regime will fundamentally change Ireland's occupational pensions framework and how employers approach provision of retirement benefits. The Bill is expected to quickly pass through the Oireachtas and become law in the next few weeks. 

The Bill has clarified a number of key points that employers will need to note:

• The planned start date for the new regime will be 1 January 2025.
• All employees aged between 23 and 60 and earning more than €20,000 per annum across all employments will be affected. (AE will not apply to the self-employed).
• A central state retirement savings system will be introduced, to be run by a newly established National Auto Enrolment Retirement Savings Authority. The new system will work alongside the existing occupational retirement savings regime. 
• All in-scope employees will be automatically enrolled into the central system unless they or their employer are paying into a pension plan or PRSA. They will have the right to opt out at certain points.
• For the first 3 years of AE, contribution rates for employers and employees in the central system will be 1.5% of all gross earnings up to a cap of €80,000. Mandatory rates will increase by 1.5% every 3 years over the first 10 years.
• In lieu of tax relief on employee contributions, the State will pay a top-up into the central system based on 0.5% of gross earnings, and equivalent to 25% tax relief (again, increasing on a phased based over the first 10 years). There are no changes to the existing system of tax reliefs for occupational pension plans.
• Pension plans will not immediately be subject to AE 'minimum standards'; these are to be introduced in future years. Until then employers will be able to determine plan membership terms.
• Employers will not be able to force employees to contribute to their pension plan or PRSA for AE purposes. Employees who do not consent to pay contributions, where the Employer is also not contributing, will be automatically enrolled into the central system. The employee engagement process will therefore be critical. 

Mercer's long-held point of view remains that, for many employers who operate a pension plan or PRSA for employees already, this may be a better total retirement benefits solution than the State's central system. These plans provide continuity, more flexibility for employers and options for employees, and - for higher earners - will be more financially favourable. However, all options will still need to be considered very carefully.

The publication of the Bill is an important development as it provides clarity on the structure of the new regime and how it will operate. All employers need to quickly understand the immediate and longer-term implications of the requirements on their businesses and workforces, the key decisions they will have to make, and how those decisions should be communicated to affected employees. 

Timely action is needed to avoid potential unwanted outcomes. Any employer that wishes to use its pension plan or PRSA for AE purposes will need to ensure that all AE eligible employees have contributed to their plan or PRSA prior to the commencement date of the legislation, which is targeted for 1 January 2025. If no contributions are being paid by the commencement date, the employees will be automatically enrolled in the central system. 

We’re already working with many employers to help them assess the potential implications, to plan ahead and to undertake appropriate actions. 

In particular, we can help with:

• Developing a strategic approach and project plan for meeting auto enrolment obligations
• Analysing the projected immediate and longer-term cost impacts on you and your employees
• Providing advice and recommendations on the key initial decisions you will need to make
• Reviewing existing pension arrangements, impacts and likely changes needed
• Providing support with employee education and communications.

We will provide further details as they emerge. In the meantime, for further assistance please reach out to your usual Mercer consultant or to our dedicated auto-enrolment team. 

You can find further details on today's announcement on the Department of Social Protection website here.