By early 2024, 750,000 workers in Ireland will be automatically enrolled in the new pension scheme

2022-06-02 0 By

The automatic pension enrolment scheme was originally intended to start this year, but has been delayed because of COVID-19.The Irish cabinet has approved plans for automatic enrolment of pensions, under which people earning more than 20,000 euros will be automatically enrolled to contribute to their pension fund.Automatic enrolment is a new employee savings and investment scheme in which the state and employers will contribute to an employee’s pension.About 750,000 workers aged between 23 and 60 who earn more than €20,000 in any sector and are not yet part of an occupational pension scheme will be affected.The automatic enrollment program was originally intended to begin this year, but it was delayed because of COVID-19.The plan will take effect in January 2024, with the final infrastructure in place by the end of 2023.The scheme was introduced because the pensions time bomb was about to explode because not enough people had occupational or supplementary pensions by the time they retired.After cabinet approved the plan this morning, Social Security Minister Heather Humphrys said legislation supporting it could now be drawn up and intended to be introduced this year.Under a long-promised pension system, employee contributions are matched by the employer as a percentage of the employee’s total income.The state will pay for the rest.Speaking to reporters this afternoon, Mr Humphrys said that for every €3 a worker put into a pension account, the employer would have to put in €3 and the state would put in €1.This means that for every three euros you put into your pension account, a total of seven euros will go into your pension.The contribution rates will be phased in over a decade, as follows: “This incremental pace again provides time for employers and employees to adjust to the program,” Humphries said.Mr Humphrys said that under the new scheme, employees would be able to opt out after six months if they did not want to contribute.If people opt out, they are not included in the program for two years after that, then automatically re-enroll after two years and have to wait another six months to opt out again.If they opt out, workers will only get back the money they put in themselves, while employer and state contributions to their pension will remain in pension accounts.”This is because at its heart automatic enrolment is about changing the culture around pension saving.”It will make it a conscious choice not to save for retirement,” Humphries said.”Retirement seems a long time away for many people and they think they have plenty of time to think about pensions.This idea of putting a little money away each week for retirement is something to think about next year.””The truth is, there’s never been a better time to start saving for a pension.”Humphrys said the state pension would continue to exist and would be the “cornerstone” of the new pension scheme.”The state pension is the cornerstone of the system.We are committed to the state pension, “Humphrys said.”The new scheme [automatic enrolment] will be on top of the state pension.”The base amount of employer contributions and state subsidies will not exceed €80,000 of an employee’s total salary.Employees can contribute more than 80,000 euros if they wish, and can opt out or suspend participation in the scheme only in certain circumstances.Mr Humphrys said the aim of the scheme was to simplify the complex pension market for employees and employers.There will be four different funds for people to save, including a default medium-risk fund.The remaining three funds are conservative funds, medium-risk funds and high-risk funds.Ireland is currently the only country in the Organisation for Economic Co-operation and Development (OCED) that does not have automatic pension enrolment.