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What is Pension Auto Enrolment and what does it mean for you?

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What is Auto-Enrolment?

 

Auto enrolment will mean that all employees, aged between 23 and 60 and earning over €20,000 per year, will be automatically enrolled into a pension scheme unless they are already contributing to a supplementary pension.

 

When will it happen?

It has been confirmed by Government that Auto Enrolment will begin in 2022.

 

Employees

You will be free to choose from a range of retirement savings options if you wish, or else have your funds allocated to a default fund/s of one of the registered providers.

The minimum contribution from you will be initially 1% of your gross earnings. This 1% is expected to rise each year, on a phased basis, up to 6%. It is expected that your pension fund will be completely portable so that you are able to continue paying into the same fund if you change employments.

For every €3 you save, the State will add €1. Your employer will match your contribution from day one, at a rate of 1% of income in year one, increasing by 1% each year until year 6 when it will be capped at 6% of gross income.

If you are already a member of a pension scheme you will be given the choice to stay where you are or switch to the new structure. If you remain in the scheme you are currently part of, then the employer will have to increase their contribution to the new “minimums” if they are not currently paying that level.

If you are outside of the age and / or earnings thresholds you will be allowed to opt in, if you so wish.

You will be free to opt out of the system at the end of the minimum membership period which is expected to be between 7 and 8 months.

 

Employers

As mentioned above, unless you already operate a pension scheme for your staff, you will be compelled to do so when Auto Enrolment comes into force. If your current pension or PRSA scheme includes a contribution from you, the employer, as well as the employee, at the rates specified under the rules of Auto Enrolment, then it is expected that there will be no need for you to change anything.

If, however, you do not already pay into a pension for your staff then you will be required to start doing so, once Auto Enrolment comes into being.

To find out more about Auto Enrolment and how it will affect you, or to find ways to “future-proof” your business, please feel free to contact us…

 

(The above is based on our understanding as at October 2018)

Steadfast Financial
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