What the hell is Auto-Enrolment (AE)?

Currently as it stands, you only have to offer an employee, membership into a PRSA (Personal Retirement Savings Account) and for the Employee to have the payment into the PRSA deducted directly from their salary. Again, currently there is NO obligation on you as the employer to pay anything into this, it can just be set up as a 100% employee payment. This means that an employee must opt into this scheme, ie they must approach you to facilitate it.

Auto-Enrolment is the automatic inclusion of all staff aged between 23 – 60, earning over €20,000 gross per year, into a pension scheme, whereby both the Employee and you as the Employer MUST pay into the scheme. Its automatic inclusion and can be quite costly.

The rates of payment into the scheme, start out at 1.5% of the gross pay, from both the Employee and you, the Employer. This figure rises every 3 years by 1.5% up to year 10 where the Employer must pay 6% of the employee’s salary into the scheme and the Employee must do the same.

What’s the need for this?

Estimates currently say that between 700,000 – 800,000 people have no private pension entitlements and will become entirely reliant on state pension. Government are quite keen to try and reduce peoples 100% reliance on the state pension.

How much will this cost me as the employer?

Well, the figures are set out now clearly with the scheme starting with 1.5% deduction through payroll for each employee, deducted from their salary and you must match that at 1.5% as well.

As a costing exercise, if you fill in the salaries of all your staff on the attached spreadsheet (no names just salary) that fall into that category of 23-60 years of age and earning more than €20,000, we can cost it out for you.

When will it start?

Initial dates show that the department are looking to get this moving by 1st January 2025. Our industry is off the opinion that this date is VERY optimistic, as there is a hell of a lot of back office work to be done before this can start BUT it’s the date that we have to go with.

Is there an alternative as this could be quite costly?

Yes we believe there are alternatives already in place in our industry, that make sense to adapt NOW before the planned start date of Auto-Enrolment on 1st January 2025. We believe that having the discussion about setting up a company pension scheme before that date will help unburden you of some of the cost associated with AE.

  • Setting up a company pension scheme or a PRSA scheme can be set up with employee/employer payments from as low as €50 per month. Being in a company pension scheme automatically excludes people from being enrolled in the Auto-Enrolment Scheme.
  • The New AE Scheme has NO facility for early retirement whereas a company pension has. So if your employee leaves work at 60/61/62/63/64/65/66 they can access their tax free lump sum from their pension fund. With Auto-Enrolment, there is NO early retirement facility and the only time they can access their fund is whenever they become eligible to the state pension. There is no date for this in the legislation, so if the state pension entitlement age gets pushed out to 70, that’s the earliest they can access the AE pension.
  • The employee will have 100’s of funds to choose through a company pension, whereas with AE they will have 4. (Low Risk, Medium Risk, High Risk and default).
  • The company pension would be set up by a financial advisor giving the client half yearly reports, and meetings on how the fund is performing. With AE there is currently no provision for any advice or meetings of any kind.
  • With Employees paying tax in the 40% bracket, they will lose out as the effective tax rate on AE is capped at 30%.
  • As the payments into a company pension are determined by you as the Employer and NOT a fixed increase in % every 3 years, the cost is much easier to control. Considering the AE is setup on someone Gross salary, you could have people on commission and it’s the yearly gross figure that AE would be calculated on. Whereas with a company pension scheme or a PRSA you can decide the figure and its not reflective on any salary figure, which represents a potential for big savings.
  • We don’t charge for meetings/consultations or setting up company pension schemes. (we don’t hand you an invoice for setting up schemes!)

We believe it’s vital that people at least have the discussion about this, if nothing else, it will make you aware of what’s coming down the line. Keep in mind that come the 1st January 2025,if the AE scheme starts, your employees will not get much notification about this.

We can help with this… We can meet up with staff, after we’ve had the discussion with you as the employer, and inform them fully about what to expect.

But just to be clear, once AE starts, its non-advice based, meaning we can’t issue guidance to Employees on the choice of funds or anything in connection with it. BUT in the case of a company pension schemes or PRSA’s we can guide staff through the full journey from start to retirement, with yearly meetings to make sure they are on track.


Contact us today at 042 93 39337 or email us at info@christymcgee.com for more details info@christymcgee.com