The government has agreed “in principle” to a number of key components and remains committed to implementing the AE system by 2022, but certain policy decisions remain. In addition, other actions — such as introducing enabling legislation, tendering for services and establishing the operational infrastructure — must be completed. Furthermore, these matters could be impacted by other developments, such as a general election, Brexit, and regulatory changes required to introduce the institutions for occupational retirement provision (IORP II).
The government has agreed on the following:
- Implementation of a defined contribution AE system by 2022. In general, employees between the ages of 23 and 60 who earn €20,000 or more will be automatically enrolled in the system with no waiting period, and other employees may opt in. Mandatory AE requirements won’t apply to any employee who is already a pension scheme member, provided the scheme meets certain minimum standards.
- AE will be phased-in. The minimum mandatory contribution will be set at 1.5% of gross earnings, increasing by 1.5% every three years until year 10, when it will reach 6%.
- Employers will be required to make a matching tax-deductible contribution at a specified contribution rate, capped at a qualifying earnings threshold of €75,000 (the threshold will be reviewed periodically).
- Employees will be able to opt-out of the AE system after six months. The opt-out window will begin at the start of month seven and close at the end of month eight. Future opt-out windows would be provided when contribution rates increase, and savings suspension periods would allow members to temporarily cease contributions. If members opt out, they will be automatically reenrolled after three years, but could choose to opt-out in the future.
- Employees will choose their registered provider and fund options, with providers allocated to employees on a rotating basis if the employee doesn’t make a choice.
- When employees change jobs, their accumulated contributions will follow them in the same fund (a “pot follows member” approach).
- Fund management charges on savings will likely be capped at 0.5%.
Numerous important elements remain, including the scope and role of the Central Processing Authority, the functions of registered providers, and the investment fund framework’s structure. In addition, the government hasn’t finalized its approach to the retirement benefit pay-out phase, and most crucially, the basis on which the state financial incentive will be provided.