Auto-enrolment (AE) has been big news in the pension industry, and with its imminent arrival in 2025, we want to make sure you have all the necessary information to make the right decision for you and your employees.
We will outline what auto-enrolment is, how it affects you as the employer, and the alternatives available, such as an occupational (or company) pension scheme.
Once the Automatic Enrolment Retirement Savings System Bill 2024 passes, auto-enrolment will be introduced in Ireland – with an anticipated timeline of January 2025.
Auto-enrolment is a new pensions savings scheme for employees who aren’t already paying into a company pension scheme or PRSA. Under the scheme, the employer, as well as the employee and the government, will pay a certain amount into the pension fund.
Employees who meet the requirements for auto-enrolment – aged between 23 and 60, are not currently part of a company pension scheme or PRSA and earn €20,000 or more per year – will be automatically enrolled in the scheme. Employers will be obligated to ensure payroll can take instruction for enrolment, calculate and pay employee and employer contributions to the National
Automatic Enrolment Retirement Savings Authority (NAERSA), and match members’ contributions up to an eventual maximum of 6% subject to an earnings threshold of €80,000.
Employer contributions are deductible for corporation tax purposes.
Employer contributions are to start at 1.5% of gross pay, which will increase to 3% by year four, 4.5% by year seven, and reach the cap of 6% by year ten. Contributions are fixed and neither employee nor employer can contribute more or less than the set rate.
Employers who fail to comply with their obligations will be subject to penalties and possibly prosecution.
An occupational – or company – pension is one facilitated by the employer, to provide a regular income after retirement. While there is no legal obligation for employers to provide a company pension, many larger employers do, although many smaller employers often do not.
If a company pension is not provided, employers must provide employees with access to a Personal Retirement Savings Account (PRSA).
There are many benefits to a company pension scheme for employees including contributing at source, receiving tax relief on contributions, and that investment gains are not taxed. There is also a tax-free lump sum available on retirement (subject to certain limits), and it will likely be set up to provide for dependents upon the employees’ death.
In addition, many companies will match employee contributions to a set percentage, making it very attractive.
A company pension is more tax efficient for an employee with tax relief of up to 40%, while auto- enrolment is beneficial for those with a 20% tax relief.
For employers, there are many benefits to providing a company pension. From talent attraction and retention, showing employees that the company cares for the longevity of their career with the
business as well as their quality of life now and post-retirement, companies offering an occupational pension tend to report a higher level of employee satisfaction.
If choosing between implementing a company pension scheme or the auto-enrolment scheme, our advice would be to implement a company pension scheme. Not only is it more beneficial for your employees, who can avail of higher tax relief on contributions, but they can also pay in additional voluntary contributions to top up their pension, which is not an option with the auto-enrolment scheme.
The choice of funds available is also limited within the auto-enrolment scheme, while a company pension can facilitate a wider range of schemes.
The pensions landscape in Ireland is evolving rapidly, and with increasing life expectancies, the need for robust retirement planning has never been more critical. The pension gap in Ireland is huge, according to a survey by the Central Statistics Office, 47% said they never got around to organising it or would organise it at a future date. These statistics underscore the importance of comprehensive pension schemes to ensure financial stability and security for our future. Whether it’s for an individual or company pension scheme, at Campion Insurance, we do the research to offer the most appropriate plan for our clients. With so many variables to consider, having an expert with your best interests in mind can make all the difference.”
— Robert Tyrrell, Director & General Manager, Ireland
Company Pension schemes offer significantly better tax advantages for higher rate taxpayers due to the increased employee contribution incentives. Both companies and employees benefit from greater flexibility around retirement options and investment control, along with the ability to make one-off lump sum contributions or add AVCs. It’s crucial to note that both parties can also contribute at higher rates in Company Pension Schemes compared to the relatively low levels offered by the Auto Enrolment Scheme. And most importantly, when setting up a group pension scheme for your employees, you’ll receive ongoing advice & support from our financial services experts throughout the life of the pension scheme.”
— Ivan Dunne, Head of Financial Services
To find out more about Company Pension Schemes, call our Employee Benefits Specialist Dermot on 086 164 7306 or email dermot.feeney@campion.com
Campion Insurances Limited trading as Campion Insurance, PIB Global, Bestquote.ie, Future, Venture and ISME Insurance Services is regulated by the Central Bank of Ireland.
