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Auto-Enrolment Uncovered

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What is auto-enrolment?

Auto-enrolment is a new retirement savings system for employees that will be

introduced in January 2025.


Many employees do not have a pension scheme, which means that they will be

relying on the state pension when they retire. While the state pension can make sure

that retired people stay above the poverty line, most people are used to having more

money to live on.


How will it work in practice?

People who do not have a pension scheme, earn more than €20,000 per year and

are aged between 23 and 60 will be automatically enrolled into the new system. This

means that they will have extra money when they retire and won’t have to rely on the

state pension alone.


An extra benefit to employees is that their employer and the State will also contribute

– for every €3 that an employee puts in, the employer will also put in €3 and the

State will top up by €1. This means that for every €3 contributed by the employee, €7

will be put into the employee’s account.


The benefit for employers is that they’ll be able to look after their employees without

the administrative burden and cost of setting up a pension scheme themselves.


People earning less than €20,000 per year and who are aged outside the 23-60

bracket will be able to opt in if they aren’t already in a pension scheme.


Contributions will be phased in so that everyone can get used to the system without

a steep change in income.


Employees will be able to leave the system or pause their contributions under certain

circumstances but will be automatically re-enrolled after two years if they are still

eligible.


Who will administer the scheme?

An independent body, the National Automatic Enrolment Retirement Savings

Authority (NAERSA), will be set up to administer the scheme and look after

participants’ best interests.


Conclusion

Employees maybe looking for improved alternatives for benefits from employers that

allow increased flexibility and advice to be incorporated. However, there are approx.

800,000 employees without pension coverage and the introduction of Auto-

Enrolment will increase that coverage considerably, whether it is through the Auto-

Enrolment system or through those arrangements currently available through a

Financial Broker.


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