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Auto-enrolment more attractive for lower-paid

The Government’s plan for pension auto-enrolment will be more attractive to lower-paid workers, because of the lack of built-in tax relief, an Eversheds Sutherland employment-law seminar has heard (23 October).

The seminar heard that private-sector pensions would be more tax-efficient than the State system, and that this inflexibility could be seen as an own goal for the Government.

It was a policy decision for the State to introduce its own pension arrangements, outside of private-sector plans.

Complex

Partner Peter Fahy told attendees at the firm’s office in Dublin’s Earlsfort Terrace that similar plans introduced 12 years ago in Britain had proven extremely complex for employers to administer from payroll.

Initially in that country, large employers went through “a huge amount of pain” to auto-enrol workers for pension entitlements based on very complex calculations, he said.

However, employer contributions in the planned Irish scheme were more generous than what was offered in Britain, he stated. The scheme would be attractive to those who paid very low or no tax, he added.

AE could not be introduced as a mandatory term of existing employment contracts without consultation, but future proofing of upcoming contracts could take place, the seminar heard.

Staff who have existing occupational pensions will have opt-out rights, under certain windows.

But all employees without an existing pension will be in scope for the legislation, which comes into force in September 2025.

ES partner and head of employment law Julie Galbraith, who addressed the seminar, said that one in five respondents surveyed have not yet taken steps to consider auto-enrolment.

“While it is not due to commence until late September 2025, auto-enrolment will impact all employers, and many may still have a lot to do.

"For example, while many organisations have a pension scheme in place it may not be adequate – Is there a waiting period? Can all types of workers access the scheme?" she said.