Irish Pensions – Auto Enrolment

The “My Future Fund” scheme is designed to automatically enrol employees into a retirement savings plan if they meet certain criteria. Under the scheme, the employee, employer, and the Government all pay a certain amount into the employee's pension fund.

The Government has said that it plans to introduce the new AE scheme in order to automatically enrol up to circa 800,000 employees between the ages of 23 and 60, and earning more than €20,000, who are not currently part of a pension plan. This is welcome as it will provide a retirement plan for people without a work or private pension to save for retirement. This is particularly relevant given concerns for the ability of the State to support the expected increase in the number of retirees in receipt of the State pension in the future.

Operation of the AE scheme

The Automatic Enrolment Retirement Savings Systems Act 2024 was signed into law in July 2024. The National Automatic Enrolment Retirement Savings Authority (NAERSA). NAERSA was set up by the Department of Employment Affairs and Social Protection (DEASP) and will administer the scheme. NAERSA will collect contributions from the various stakeholders (employees, employers, and the Government) in the scheme, and invest them on the employees’ behalf. Employees may choose which risk strategy to pursue, from low to medium to high.

The Pensions Authority will supervise the scheme to ensure compliance and proper management.

Contributions will be phased in over ten years, with initial employee contributions of 1.5% rising to 6% by this time. Employers will match these contributions, and they will be topped up by the Government.

• No contributions will be sought or collected until the first time an employer runs payroll after 1 January 2026.
• The State top-up and employer contributions are capped and will apply to gross salary up to €80,000 only.

Where NAERSA determines that a person satisfies the conditions for enrolment, NAERSA shall give notice of the determination to the employer.  NAERSA will apply the criteria in place to determine if a person should be auto-enrolled.  An employer to whom notice is given but fails to act in accordance with the notice will be guilty of an offence and subject to penalties.

Key Criteria for Auto-Enrolment

• Age: Employees must be between 23 and 60 years old.
• Income: Employees must earn more than €20,000 per year.
• Current Pension Contributions: Employees must not currently be paying into a work or private pension through payroll.
• Employers cannot opt out of the AE scheme.  Failure to comply with the AE regulations and requirements may result in penalties and potential prosecution.

Irish tax implications

• There will be no tax relief for employee contributions to AE (as the State is making a direct contribution for employees within the AE scheme).
• Employer AE contributions will not be taxed as a benefit in kind to the employee.
• Income and gains derived from investments will be exempt from Irish tax while held in an AE provider scheme.
• AE funds will be aggregated with other pension arrangements when determining whether the Standard Fund Threshold (SFT) is exceeded at retirement. Any excess over the SFT will be taxable.
• Lump sum withdrawals must be aggregated with all other pensions when considering the €200,000 lifetime tax-free limit.
• Employer AE contributions should be deductible for corporation tax purposes.

AE Opt-Out and suspension

Employees can opt out of the scheme within a specific window (between six and eight months after enrolment) and can suspend contributions for up to two years. Employer and State contributions also cease during suspension. Employees will be refunded their own contributions, while employer or State contributions will remain in the fund for the employee’s benefit.

Exemption from AE requirements

The only exemptions from AE under the Automatic Enrolment Retirement Savings System Act 2024 (the Act) are in relation to “exempt employments”.  An “exempt employment” is defined as an employment where contributions are made through payroll to an Irish-approved occupational pension scheme, a PRSA, RAC, or to a PEPP.

While the AE legislation does not mention particular PRSI classes as being exempt from AE, we note from guidance material published by NAERSA that only employees insurable under PRSI Classes A, B, C, D, H and J will be required to be auto-enrolled. Employees insurable under PRSI Classes K, M and S will not be required to be auto-enrolled.

If you have any questions in relation to the above, please contact a member of the Forvis Mazars employment tax team below.