Government to contribute €1 for every €3 employees put into their pension under the proposed auto-enrolment scheme
Under the new proposed auto-enrolment pension system, the Government will pay €1 forevery €3 employees contribute to their pension. A memo is being brought to Cabinet later this week that outlines the detail around the pension scheme.
It states that employees earning more than €20,000 per annum will be automatically enrolled to make pension contributions. However, they will have the option to opt out of the scheme.
Employers will be expected to match the employee’s contribution but the plan is to introduce the scheme on a gradual basis to mitigate the financial impact.
The memo will seek permission from the Cabinet to begin the process to draft legislation. It is hoped that the auto-enrolment scheme will be up and running next year.
However, there is still some speculation that the introduction of any scheme may be delayed given the financial impact of Covid-19 and concerns around burdening employers with additional costs.
For those workers with no pension coverage, they stated that they will be reliant on the State Pension as their main source of income.
Considerations for employers
The challenge for employers will be the additional costs to the business due to additional pension contributions given the number of additional employees that will be covered by the scheme.
Employers will also have to consider any rules or guidance on what to do with employees who are already in either a defined benefit or defined contribution scheme. An additional consideration is the plans to extend the age to qualify for the State pension, which is currently 66. It was expected to increase this to 67 last year but that decision has been reversed.
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