On Tuesday, the Minister for Social Protection, announced the details of the Final Design Principles for the Automatic Enrolment Retirement Savings System for Ireland.
Ireland is the only OECD country that does not have an Auto Enrolment or comparable scheme in place to encourage people to save for their retirement. The goal of Automatic Enrolment is to close this coverage gap in the pension system. It will apply to all employees who fulfill specific age and wage requirements and do not already have access to an employer-sponsored pension plan. Employees will make contributions from their paychecks, which their employer will be obligated to match, with the state contributing a top-up.
Around 750,000 workers will be registered in a new workplace pension program, and while membership will be optional, workers will have the option to opt out. The new approach is intended to make it easier for employees to make pension decisions and for companies to provide a workplace pension.
When completely established, a worker earning €35,000 per year would have accumulated a fund of €293,000 during their working life, excluding investment returns. After ten years, the new system will have accounted for almost €21 billion in money, excluding investment returns.
The following are some of the important aspects of Auto Enrolment:
1. A phased deployment plan will be in place by 2023, with employee enrolment beginning in 2024. Auto Enrolment will be brought in over the course of a decade, with both employer and employee payments starting at 1.5 percent and increasing by 1.5 percent every three years until they reach 6 percent by Year 10. (2034). Employees between the ages of 23 and 60 who earn more than €20,000 across all of their jobs will be automatically registered if they are not already enrolled in an occupational pension system.
2. Contributions assistance: To encourage employees to stay in the system, the company will match their pension savings one-to-one. In addition, the state will offer a €1 bonus for every €3 saved by the worker. This means that for every €3 saved by the employee, the company and the state will spend an additional €4.
3. Employees will have access to a workplace pension savings system that is co-funded by their employer and the government under Auto Enrolment. Although participation is voluntary (i.e., people are not required to participate), the system functions on a 'opt-out' rather than a 'opt-in' basis.
4. Simplicity: The system will be administered by a Central Processing Authority (CPA), which will keep administrative expenses and hassles to a minimal for both businesses and employees. Employers will not be forced to invest in the creation or acquisition of an occupational plan for their own firm; instead, they will be expected to make payroll deductions easier. People who change jobs would not have to join a new pension system, and those who have many jobs will have their pension assets merged into one 'pensions-pot.'
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