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Apr 2022

5

Preparing for Auto Enrolment: Everything you need to know

Automatic Enrolment in Ireland is a subject which has been in discussion for over 25 years now. In 2017, the matter was brought to the forefront again with our Taoiseach at the time, Leo Varadkar, announcing that the scheme would begin in 2021. However, as we all know, delays caused by COVID-19 meant that this didn’t happen as planned. One year later, we are in a much better place and thankfully, details on the planned state pensions Automatic Enrolment scheme were announced on the 29th of March 2022.

 

What is Auto Enrolment?

Auto Enrolment is being brought in to ensure that those working in the private sector have an income for their retirement, beyond the state pension. The scheme will be phased in over the next ten years. The system is to be set up by 2023 and employee enrolments into the scheme will begin in 2024. All employees aged between 23 and 60, earning over €20,000 a year and who are not already in an occupational pension scheme, will be automatically enrolled. While participation in the scheme will be voluntary, workers will have to opt-out of the scheme rather than opt-in. It is hoped that this model will encourage workers to remain in the scheme.

 

How much will go towards employees’ pension?

The employee, the employer, and the state will all make contributions towards the employee’s pension pot. Employees’ pension savings will be matched on a one-for-one basis by the employer, up to a maximum of €80,000 of earnings. The state will 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 contribution of €4 will be made by the employer and the state combined.

 

Pension contribution example

Employee Contribution Employer Contribution State Contribution
€3 €3 €1

Employer and employee pension contributions will be calculated as a percentage of the employee’s income. Rates will start at 1.5% and will increase every three years by 1.5%, until they eventually reach 6% by year 10 (2034).

 

Pension contribution rates

Years Contribution rate
2024 - 2026 1.5%
2027 - 2029 3%
2030 - 2033 4.5%
2034 onwards 6%

 

What does the new Automatic Enrolment scheme mean for payroll processers?

When the scheme is first rolled out in 2024, it will mean a few additional steps in the payroll process. Those processing payroll must ensure that all eligible employees have been enrolled into one of the four retirement saving funds that employees will have to choose from. For employees who do not express a preference for any fund, they should be enrolled into the default fund. After 6 months of participation, employees will have the choice to opt-out or suspend participation. When a person chooses to opt out, they can receive a refund of their contributions. Once opted out, the employee will need to be re-enrolled after two years.

 

Will there be changes in my payroll software?

Your payroll software provider will have ample time to implement these changes into the software and should be ready to go by 2024. At BrightPay Payroll Software, Auto Enrolment is something that we have already programmed into the UK version of our software, BrightPay UK, since the scheme was introduced in the UK in 2012. Thanks to this experience, we already have the knowledge of how Auto Enrolment in the software should work. Our aim, as is with BrightPay UK, will be to make the Auto Enrolment process as simple for the user as possible.

At BrightPay, we aim to use our experience of the rollout of auto enrolment in the UK to automate Auto Enrolment for you within the software and make the introduction of the scheme as simple as possible, for employers and payroll processers. To find out more about how BrightPay can simplify the payroll process, book your free 15-minute demo of BrightPay today.

 

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Posted byElaine CarrollinAuto Enrolment