Ireland’s Minister for Social Protection, Heather Humphreys TD, has announced the publication of the Automatic Enrolment Retirement Savings System Bill 2024, following its approval by the cabinet last month.

Approximately 800,000 workers will be enrolled into the retirement savings scheme from January 2025, with a new public body, the National Automatic Enrolment Retirement Savings Authority, established to administer the system.

Commenting on the bill, which will shortly be brought to the Oireachtas, Minister Humphreys said: “This represents one of the biggest reforms of the pension system in the history of the state and is an important milestone in supporting people in their retirement years.”

At present, around 35 per cent of private sector workers in Ireland have no occupational or private pension meaning they will be solely reliant on the state pension when they retire. Under automatic enrolment, employees will have access to a workplace pension retirement scheme which is co-funded by their employer and the state.

The scheme will see employees aged between 23 and 60 years old, who earn over €20,000 per year, and who are not already paying into a pension scheme, automatically enrolled.

In practice, for every €3 put in by the employee, the employer will also contribute €3 and the state will contribute €1. The government plans to phase in contribution rates gradually over a period of 10 years.

Starting in 2025, employees will contribute 1.5 per cent of their gross earnings, which will be matched by their employer, and topped-up by the state. These rates will gradually increase every three years until reaching a maximum contribution rate of 6 per cent, per employee, 6 per cent, per employer, plus 2 per cent from the state from 2034 onwards.

Minister Humphreys added: “This landmark legislation is about protecting our workers, and particularly our young people, when it comes to reaching their retirement years. Automatic Enrolment has been talked about for decades, and today is a clear sign that we mean action. This legislation will provide the foundation for the most radical shake up of the pensions landscape in Ireland for generations.

“For me as Minister, having almost 35 per cent of private sector workers without pension coverage isn’t acceptable or viable. We’ve been an outlier in terms of pension coverage for too long – and that’s now going to change. This is a hugely important piece of legislation in terms of protecting workers’ future and I look forward to bringing it before the Oireachtas immediately after the Easter Recess.”

The goal of automatic enrolment is to increase pension coverage and pension adequacy in Ireland. Ireland is the only country in the OECD that does not yet operate this or a similar system as a means of promoting pension savings. A key feature of such systems is they operate on an ‘opt-out’ rather than an ‘opt-in’ basis.

Participants will be allowed to opt-out or suspend their contributions after a mandatory six-month participation period. They will be brought back into the system again after two years unless they have an alternative pension arrangement.

It is estimated that a worker on the national average wage contributing consistently for 40 years could build up a savings pot of nearly €750,000, including investment returns, over the course of their working life.

The bill also provides for the establishment of a new state body, the National Automatic Enrolment Retirement Savings Authority, to administer the scheme and act as a buffer between participants and the financial investment companies who will be tasked with growing their savings.

The authority will act in the best interests of participants, collect contributions, arrange for the investment of contributions, manage participant accounts that will be accessible through an online portal, and facilitate the payment of savings at retirement.

“We know that people are living longer and that is good news. But the changing demographics mean that a lot of pressure is coming on the state pension and we have to find ways of supplementing it in the future. The state pension is the bedrock of our pension system and it’s here to stay. But automatic enrolment will give workers in the future that bit extra in terms of income to support good living standards.

“According to figures from the Central Statistics Office, only one-third of private sector workers have supplementary pension coverage. I want to change this. “Without auto enrolment many retirees could suffer an unwanted reduction in their living standards when they retire,” Minister Humphreys added.

“It is imperative that we take this initiative now while we have the opportunity. We have been talking about introducing a new workers’ pension for decades and we are finally on the brink of achieving it.

“With the support of my colleagues in the Dáil and the Seanad, I intend to bring this legislation to enactment as quickly as possible, and the first workers enrolled in January 2025.”

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