What is Auto-Enrolment?
Auto-enrolment is a retirement savings plan that the Irish Government will introduce, with the goal of improving the retirement prospects of Irish workers.
The scheme requires both employers and employees to contribute to a pension fund, supplemented by additional contributions from the Government. As the name implies, all eligible workers will be enrolled in the program automatically.
Currently, about two-thirds of Ireland’s workforce lacks any form of pension savings[1]. This means that many will have to rely solely on the state pension upon retirement.
For those who have access, joining a defined contribution company pension may be more beneficial. However, for those without that option, auto-enrolment provides an alternative.
Why Isn’t the State Pension Alone Enough?
While eligible workers can claim the state pension in Ireland, it currently amounts to less than €15,000 annually: €277.30 per week.
Although this can provide some support, most people without additional pension savings would experience a significant drop in income and living standards.
Moreover, projections suggest that by 2050, the ratio of working-age individuals to those over 65 will decrease significantly – from five-to-one today to just two-to-one[2].
The aim of auto-enrolment is to foster a savings culture among Irish workers, so that in retirement, they will have both their pension and the state pension, thereby ensuring a better financial future.
How Auto-Enrolment Will Function in Ireland
You will be included in the auto-enrolment scheme if you:
- Are between the ages of 23 and 60,
- Earn over €20,000 annually,
- And are not already part of a pension scheme with payroll-based contributions.
The system operates on an “opt-out” basis—eligible workers will automatically be enrolled but can choose to opt out after six months, with a two-month window to do so. Those who opt out will be re-enrolled after two years.
Auto-Enrolment Contribution Structure
The contribution rates for auto-enrolment will gradually increase over several years[3].
Initially, employees will contribute 1.5% of their gross earnings. Employers will match this, and the Government will add another 0.5%.
This means that someone earning €40,000 annually would contribute €600, while their employer and the Government would collectively add €800 to their pension fund.
After three years, contributions will rise to 3.0%, with corresponding increases from employers and the Government. The rates will further increase to 4.5% after six years and reach 6.0% after a decade, where they will remain.
Auto-Enrolment Contribution Rates
| Years | Employee Contribution | Employer Contribution | Government Contribution |
| 0 – 3 | 1.5% | 1.5% | 0.5% |
| 4 – 6 | 3% | 3% | 1% |
| 7 – 9 | 4.5% | 4.5% | 1.5% |
| 10+ | 6% | 6% | 2% |
Source: Department of Social Protection (2022). The Design Principles for Ireland’s Auto Enrolment Retirement Savings System.
Note: Employer and Government contributions are limited to salaries up to €80,000. If you earn above this threshold, the contributions are calculated based on the first €80,000 of your earnings.
Potential Retirement Savings Through Auto-Enrolment
The amount you will accumulate for retirement depends on various factors, making it difficult to provide exact estimates.
Pension funds are investment vehicles, and their value can fluctuate. However, long-term investments generally tend to grow over time.
A 25-year-old with a €30,000 annual salary starting auto-enrolment in 2025 could see total contributions exceed €153,000 by age 65, including €87,600 from employer and Government contributions.
Considering potential salary increases and investment growth, the final pension pot could be even larger.
Comparing Auto-Enrolment with Company Pensions
Some workers might find that participating in a company-sponsored pension or setting up a personal pension is more advantageous than relying on auto-enrolment.
While auto-enrolment is certainly a better option than having no pension, discussing available pension options with your HR department is recommended.
If your employer does not offer a pension plan, exploring a private pension with a financial advisor could be beneficial before auto-enrolment becomes available.
Contributions and Tax Relief Differences
A major distinction between auto-enrolment and company pension plans is how employee contributions are treated for tax purposes.
Typically, contributions to a company pension are eligible for income tax relief, meaning they are not taxed as part of your income.
In contrast, auto-enrolment contributions do not qualify for the same tax relief, although the Government’s contribution is equivalent to a 25% tax relief benefit.
Those who pay a higher tax rate can receive income tax relief at 40% on contributions to private pensions, subject to certain limits.
Employer Obligations Under Auto-Enrolment
Employers will be required to match the pension contributions of eligible employees under the new system. Non-compliance could lead to penalties and legal consequences.
Large employers with existing pension schemes might still need to consider auto-enrolment. Since these plans are often voluntary, not all employees may participate. Employers must decide whether to enroll all employees in their current scheme or allow them to join the state’s auto-enrolment system.
Smaller businesses will also need to evaluate whether to use the state system or establish a more flexible occupational pension plan that includes tax benefits.
If You’re Already in a Company Pension
If you are part of a workplace pension plan, the introduction of auto-enrolment will not affect your current setup.
Previously, it was up to individuals to join a pension scheme. With auto-enrolment, employers must ensure all eligible employees have access to a pension plan.
If you have any questions about your specific pension arrangement, it’s best to reach out to your company’s HR or benefits team.
For those looking to start a pension, you can book an appointment to speak with one of our financial advisors.
[1] Auto-Enrolment Guide for Employees | Gov.ie – March 2024
[2] Population Ageing and the Public Finances in Ireland | Department of Finance – September 2018
[3] The Design Principles for Ireland’s Auto Enrolment Retirement Savings System| Department of Social Protection (2022)
