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Auto Enrolment – FAQ’S


What is auto enrolment?

Auto enrolment is a retirement savings scheme which people will automatically be enrolled in once they meet certain requirements. It has been set up to provide a pension plan for people without a work or private pension.


Why is auto enrolment being introduced?

The reason why it is being introduced is

·   Many people don’t have work or private pensions and will only depend on the State Pension when they retire. This possibly means a drop in Income and a fall in living standards. This means that they may experience a drop in income when they retire.

·   The population in Ireland is ageing which means that there will be fewer people working in the future to support the retired population. It’s vital that people start saving for their future now to ensure that they have enough money when they retire.

 

·   When is auto enrolment starting in Ireland?

Auto enrolment is expected to begin in the first quarter of 2025


Who will be automatically enrolled in the scheme?

You must meet these conditions to be automatically enrolled:

·   be aged between 23 and 60

·   earn more than €20,000 per year

·   not currently be paying into a work or private pension through payroll


Who will run the auto enrolment retirement savings system?

It will be run and managed by a new body set up by the Government (Department of Social Protection)

Who will regulate auto enrolment?

The auto enrolment scheme will be supervised by the Pensions Authority. It will have statutory independence and will be governed by a Board of Directors.

The Financial Services and Pensions Ombudsman  services will also be available to scheme members.


Can I participate if I don’t meet the eligibility criteria?

Anyone can opt in to the scheme who

·   is working

·   is under the state pension age

·   does not already have a pension through payroll

 

How can I enrol?

When the scheme launches the new body will automatically enrol you if you are eligible. You do not need to take any action.

If you are not immediately eligible from the outset, you can contact the new body and request to opt in.


Is auto enrolment going to replace the State Pension?

No, this will not happen. Auto enrolment is designed to supplement people’s retirement savings.


I already have a work pension or personal pension? Am I eligible for auto enrolment?

·   If you already have a pension that you are paying into through company payroll, you cannot participate in the scheme.

·   If you have more than one job, and you do not have a pension scheme then you will be automatically enrolled if your combined wages are more than €20,000 per annum.


 I used to contribute to a pension fund, but I don’t anymore. Am I eligible for auto enrolment?

If you are no longer contributing to a work or personal pension, and provided you meet the other requirements, you will be automatically enrolled.


Will my employer have to contribute to my existing personal pension now?

No, there are no plans to force employers into contributing to personal pensions.


Can I keep contributing to my personal pension and be eligible for auto enrolment?

If you are already contributing to your personal pension through your payroll, you are not eligible for the scheme.


Should I cancel my personal pension so I can be automatically enrolled?

We cannot advise if auto-enrolment or your current personal pension is better suited to your situation. The best option for you depends on your own circumstances.

 

Will I have to pay fees?

Fees will be explained near the launch date. Employees will be able to view fees on their annual statement that will be accessible online.


Do I have to stay enrolled?

No, you can opt out or suspend contributions in the following circumstances.

·   If you choose to opt out six months after you have been enrolled, you will be refunded your contributions.

·   If you decide to opt out of the scheme within months 7 and 8 after a change in contribution rates, you’ll get a refund. This refund will be based on the difference between your own contributions at the old and new rates during the prior six months. This option is only available during the first 10 years as contribution rates gradually go up from 1.5% to 6%.

·   If you decide to suspend contributions at any other time, you will not receive any refund in this scenario.

After two years if you still meet the eligibility criteria you will be re enrolled. You can opt back in at any time before two years pass.


What happens to the amount I have saved if I opt-out?

Contributions that are not refunded (including the employer and any State contributions) will remain in your savings pot and will continue to be invested. So even if you opt-out, you will still have a pot to drawdown at retirement.


How much will I be contributing to auto enrolment?

The contributions are calculated based on your gross salary (your earnings before tax deductions). The contributions will be gradually increased over the first 10 years.


Contribution Rates

Year 1 to 3

Year 4 to 6

Year 7 to 9

Year 10+

1.5%

3%

4.5%

6%





Your employer will match your contributions and the State will top-up €1 for every €3 you pay in. Contributions will be calculated up to a maximum gross salary of €80,000 per annum. This means that if you earn more than this, you will only pay contributions on the first €80,000 you earn.


Can I make additional contributions?

There are no plans currently to allow you to make additional contributions.


Do I have to choose how my money is invested?

No, you will not have to choose how your money is invested if you do not want to.

The scheme will operate a default strategy, which will be operated on a ‘lifecycle’ basis. This means the risk level of your investment will be decreased as you get closer to retirement.

If you want to choose an investment strategy, you will be able to choose from the following:

·   high risk

·   medium risk

·   low risk


Will my savings be secure?

Your savings pot will not be guaranteed by the State. This is the same as any other pension plan.

Through auto enrolment the state is helping you save for your retirement, but the funds do not belong to the State. Each individual participant will build up their own pot of money which belongs to them.

The State will not have any right to use it for any purpose. It will always be your personal pension which will be accessible to you on retirement.

The government have taken a number of steps to ensure that the money invested on your behalf stays as safe as possible, including the following

·   choosing low risk investments in the default strategy

·   supervised by the Pensions Authority

·   using regulated funds for investing your savings

·   contracting reputable investment firms that are fully regulated


What happens if I change job?

Auto enrolment is designed on a ‘pot follows the member’ basis, meaning your pension savings pot will follow you to your next job. This happens automatically once you have been enrolled, so you don’t have to take any action.


What happens if I have more than one job?

If you have more than one job, your gross pay combined from all of your jobs will be considered for the eligibility assessment of the scheme.

You will be enrolled in respect of any jobs where you do not have a supplementary or occupational pension contribution paid through payroll.


What happens with auto enrolment if I stop working?

If you stop working at any time before retirement, you will stay enrolled, but won’t make any contributions to the scheme. Your savings will continue to be invested. If and when you start to work again, you will begin making contributions, provided you are not paying into a supplementary or occupational pension in your new job.


What happens if I emigrate?

If you emigrate your savings pot will continue to be invested (with no new contributions) and you will have access to it at retirement. If you return to Ireland to work, you may be enrolled again if you meet the criteria at that time.


What happens to my savings if I die?

If you die before you draw down your savings, the pot will become part of your estate. Your savings and investments will be drawn down at the value they are at the point that the body running the scheme is notified of your passing. The savings will then be treated the same as any other savings or investments in your estate.


What happens when I retire?

At present, when you retire, you will receive a lump sum payment. A range of retirement products will be made available as the scheme evolves.


Can I draw down my savings before retirement age?

No, early draw down is not be permitted except in the case of early retirement due to ill health.


Can I claim tax relief on my contributions?

No, however the top up from the state is equivalent to 25% tax relief.


What if my employer doesn’t pay the contributions?

There are protections in the legislation to ensure that your employer must make contributions on your behalf. If they do not, they could be subject to fines and repayment with interest.


What information will I have on the status of my auto-enrolment savings?

There will be an online portal where you will be able to see all details relating to your savings. This will be user friendly.


Employer FAQ's

How do I enrol my employees?

You will need to ensure that existing processes that you’re familiar with, like payroll software are up to date come launch date.


I already have a pension scheme in place for my employees?

Any existing pension scheme will run in parallel with auto enrolment. Any employees that have a record via payroll of either employee contributions and/or employer contributions will not be enrolled in the new scheme.


How much will auto-enrolment cost my business?

The main cost is the contribution you will need to pay for each employee. The contribution rates are outlined in the table below, and will be calculated on the employee’s gross salary and paid from the net.

The rates are being phased in over the first 10 years from the launch of auto-enrolment. The reason for this is to give employers time to budget for auto-enrolment.


Contribution Rates

Year 1 to 3

Year 4 to 6

Year 7 to 9

Year 10+

1.5%

3%

4.5%

6%





Administration costs for employers will be minimal, as they will not be doing the work.


Can I claim tax-relief on my contributions?

Yes, if you are paying corporation tax, you will be able to claim tax relief on the employer contribution. You will however not be able to claim relief on any employee contributions.


Will I have to contribute to employee PRSAs now?

No, there are no plans for this.


Do I have to also pay contributions for employees who choose to opt-in?

Yes, employees who choose to opt-in will be treated the same as those who are automatically enrolled, and that means the employee, employer and State will contribute the set rates as outlined above.


Does my existing scheme need to meet standards to be exempt?

No, once there is a pension contribution paid through payroll from an employee or employer, the employee will be deemed as having a pension already and won’t be enrolled.

In the future, standards will be developed.


What about waiting periods?

If your existing scheme operates waiting periods then it is likely that some employees will be automatically enrolled into auto-enrolment. However, they will be able to opt-out after 6 months and join the existing scheme if they choose to.


Do owner directors on payroll become auto enrolled or are they regarded as self-employed?

This really depends on the PRSI class that you are contributing through as an owner director. If you pay PRSI as an employee and meet the eligibility criteria, then you will be enrolled. But if you are registered as self-employed then you will not be eligible for auto enrolment.


Will the self-employed be included?

No, the self-employed are not included in the auto enrolment scheme. This is because of the complexities of including self-employed people into a payroll software based scheme. This may be investigated further in the future. Self-employed people are encouraged to ensure they avail of current pension provision available to them and the tax relief that applies.


Will there be additional employer returns to be made by employers or will all the pension deduction information be processed through existing Revenue PAYE returns?

As an employer you will need to make a separate return through payroll directly to the central body administering the scheme. Information on how this process will work will be made available to employers closer to go-live.

The calculations on contributions will be made through your existing payroll software.

If you have any queries feel free to contract us on 086 229 3032

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