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New pensions system to start next year

A bill that will set up a new auto-enrolment system for pensions has passed all stages in the Oireachtas and will now be sent to the President.

The legislation provides for a new retirement savings scheme for workers who are not already members of a pension scheme. It is set to begin operating next year.

The Automatic Enrolment Retirement Savings System Bill 2024 also sets up an independent public body, the National Automatic Enrolment Retirement Savings Authority, to administer the system, under the aegis of the Department of Social Protection.

Preferred bidder

The department has chosen Tata Consultancy Services (TCS), which provides IT and consulting services, as the preferred bidder to administer the system.

TCS has provided a similar service for Britain’s equivalent of the auto-enrolment scheme since 2011.

The new authority will identify and enrol participants, collect and pool contributions, arrange for the investment of contributions, manage accounts – including opt-outs, suspensions and opt-ins – and facilitate the payment of savings at retirement.

Contributions

Welcoming the passing of the legislation, Minister Heather Humphreys described auto-enrolment as “a truly transformative policy”.

When the bill is enacted, employees aged between 23 and 60, who earn over €20,000 a year, and who are not already paying into a pension scheme, will be automatically enrolled in one.

Contributions made by the employee will be matched by the employer and topped up by the State. For every €3 put in by an employee, the employer will also contribute €3, and the State will contribute €1. This will apply up to a maximum of €80,000 of earnings.

Under the new system, contribution rates for workers and employers will be phased in gradually over ten years, beginning at 1.5% next year and rising to 6% by 2034.