Prepare your Business for Mandatory Pensions in 2024

There’s a crucial update on the horizon that deserves your undivided attention: the mandatory pensions roll-out in Ireland slated for 2024.

  1. What is Mandatory Pensions?

In 2024, a mandatory pension scheme, otherwise known as Auto-Enrolment, will be set in motion, impacting businesses across Ireland. If your business lacks a pension scheme and has employees aged 23-60 earning more than €20,000, they will be automatically enrolled in this initiative during the latter half of the year.

One of the main reasons for this initiative is to enhance retirement savings for the working population. By ensuring that eligible employees contribute to their pension funds, the scheme aims to address potential gaps in future financial security. Basically, most people are used to more than what the state pension can provide, so it’s a way for people to have extra money when they retire and won’t have to rely on the state pension alone.

2. Who will participate in Auto Enrolment?

Aimed at all employers with eligible employees, it is important to know who falls under the scheme and who doesn’t.

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.

Participation is voluntary, however, this system is operated on an opt-out basis rather than an opt-in. So an employee will have to specifically tell you they do not want to be involved.

If you already have a pension scheme, you will not be included.

3. When will Mandatory Pensions come into Effect?

The auto-enrolment process is scheduled for the second half of 2024, allowing businesses time to prepare for the impending changes.

4. How Much Will it Cost?

Initially, for every €1.50 that your employee puts in, you, as employer will also put in €1.50 and the State will top up by 50c. This means that for every €1.50 contributed by the employee, €3.50 will be put into the employee’s account.

So for years 1-3, employee contributions will start at 1.5% of gross pay

  • In year 4, they will increase to 3%
  • In year 7 they will increase to 4.5%
  • By year 10, they will increase to the maximum rate of 6%

As you can see, contributions to the pension scheme will be gradually phased in, minimizing the impact on income. This phased approach allows for a smoother transition, ensuring businesses can adapt to the new system without a sudden financial strain.

Benefits to Employees

The benefits to employees is that of financial security in retirement. The mandatory scheme means employees will have to contribute and will build a pension fund for themselves for retirement.

They’ll also take advantage of both employer and State top ups. For every contribution made by the employee, the employer contributes an equal amount and state adds an extra portion.

Benefits to Employers

While this is great for your employees, auto enrolment is of benefit to employers too as you won’t have to pay to set up and administer company pension schemes, which can cut into your profits. It streamlines the admin process of setting up a pension scheme.

By providing a structured pension plan, this could contribute to employee attraction, retention and satisfaction.

What to do Next?

It is important that you don’t ignore these upcoming changes and put plans in place before June. Failure to comply with auto-enrolment obligations can lead to penalties and prosecution.

Understanding and implementing these changes may seem complex, but you don’t have to navigate this transition alone.

As a trusted payroll outsourcing provider, we offer comprehensive support. Contact us today for a head start on preparing for 2024. Our experts can guide you through the process, providing information and equipping you with valuable talking points for discussions with your employees. Email or call us on 021 482 4723.