by Jane Barrett, Associate in the Pensions and Employment & Benefits department, William Fry LLP
Before leaving office, the Minister for Social Protection set the wheels in motion for auto-enrolment (AE) to launch in Ireland next year under the name “My Future Fund“.
This article considers the AE legislative updates and what employers can do to prepare for the 2025 AE launch.
Steps in Place for AE Launch
The Automatic Enrolment Retirement Savings System Act 2024 (Act) was signed into law in July, and secondary legislation has also now been passed, which will bring the Act into effect in a staged manner as follows:
- On 31 March 2025, provisions for establishing the new State body to operate AE in Ireland will take effect.
- On 30 September 2025, the remainder of the Act (including new employer AE obligations and enforcement provisions) will take effect.
Based on the law as it stands today, AE will become a reality for employers in Ireland on 30 September 2025. To support this, Budget 2025 allocated €13 million to the cost of the State’s top-up payments to “My Future Fund” from 30 September 2025, and there was clarification of the tax treatment for AE participants in the Finance Act 2024. Employers, therefore, will need to take steps to prepare for the launch of AE next Autumn.
Next Steps for Employers
The AE system is designed to operate based on matching mandatory employer and employee contributions (starting at 1.5% of gross salary but ultimately reaching 6% after year 10) with an additional State contribution. This will create a business cost for employers starting in 2025. However, employers (particularly those who currently offer a contributory pension scheme or PRSA (a Workplace Pension)) have options in approaching and preparing for AE.
Identify the portion of the workforce that is within the scope of AE
The introduction of AE will mean that employees aged between 23 and 60, on gross pay over €20,000 per annum and not already in “exempt employment” (In-Scope Workers), will be auto-enrolled into the State-run AE system. Employers should assess who in the workforce will be an In-Scope Worker. This will include all monthly paid, weekly paid, fixed-term, full-time, part-time, casual employees and those on probation. Under the Act, “employee” is widely defined and, in broad terms, captures anyone in a workforce where payroll taxes are being operated on pay. This “in-scope” analysis is something employers will need to carry out to enable them to budget for AE’s costs ahead of September 2025.
Assessing the costs and administrative issues associated with a “single scheme” or “dual scheme” approach
Employers that already operate a Workplace Pension should assess if their preference is to utilise the existing Workplace Pension to comply with AE requirements (a “single scheme” approach) as an alternative to having In-Scope Workers automatically join the State-run AE system next year (a “dual scheme” approach). One possible drawback (amongst others) to the “dual scheme” approach is the possible administrative burden of operating two differently structured pension savings systems in the same workplace. However, there are many more factors to consider, and the right decision for each employer will be workforce/business-specific.
Considering the employment law implications of a “single scheme” versus a “dual scheme” approach, review and update contracts and policies (including employee privacy notice)
The Act does not provide employers with the statutory power to enrol employees into their existing Workplace Pension to address AE compliance. If an employer follows a “single scheme” approach, the employment law implications of contractually auto-enrolling current and future employees into an existing Workplace Pension must be carefully considered.
Considering the employee relations issues of a “single scheme” versus a “dual scheme” approach
There is a risk with the “dual scheme” approach of creating a “two-tier” system of pension benefits within the one workforce. AE might be perceived as a lesser value offering with a possible latent employee relations risk. Such considerations will determine which approach is right for each employer’s business.
Considering whether any benefit design changes to existing pension arrangements may be required arising from AE
For employers who wish to use their existing Workplace Pension to comply with AE, amendments may be required to the current offering to tailor it to AE. For example, AE will require eligible employees to be auto-enrolled as soon as practicable upon joining employment. As a result, an existing Workplace Pension that operates voluntarily or imposes a waiting period before employees become eligible to join may need amendments to ensure eligible employees are auto-enrolled upon starting employment.
Training for Key Personnel
Now that AE is on track to launch in September 2025, employers will need to arrange training for the HR/Finance team or those involved in preparing the business for AE.
Conclusion
Admittedly, previous intended target dates for AE announced by the outgoing Minister for Social Protection were consistently missed, undermining the proposed timeframes’ credibility. However, the legislative levers have now been engaged to ‘lock in’ the 30 September 2025 launch date, and as such, the preparation work for employers can finally begin in earnest
About the author
Jane Barrett is an Associate in the Pensions and Employment & Benefits department (she works with the pensions and employment incentives teams) at William Fry LLP. Jane holds a Bachelor of Civil Law from NUI Galway (2010) and a Master of Laws from Trinity College Dublin (2011). Jane qualified as a Solicitor and as a “Qualified Pension Trustee” (Irish Institute of Pensions Managers) in 2016.
