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Auto-Enrolement Pension Scheme from 2014

03/03/2010 The government today announced their intended establishment of an auto-enrolement pension scheme to be implemented from 2014. This scheme will replace the existing contributory pension. Some of the main provisions of the scheme as announced are:

  • – The non-contributory pension is expected to remain in place with a commitment from the government to retain its value at 35% of average earnings.
  • – The auto-enrolement/supplementary pension scheme is expected to enrole all workers, however employees may then opt out if they wish. This will be deducted out of their payslip, with the employer also having to pay a contribution for each employee. Instead of getting a tax deduction, the State will also give a contribution equal to 33% tax relief. Although the delivery mechanism has yet to be decided, basically for each €3 contributed by the employee/employer (being a ratio of 2:1), it is expected that €1 will be contributed by the State.
  • – This effective 33% tax relief on pensions is seen as a fairer treatment, whereas the current system allows high income earners gain tax relief on pension payments at the marginal rate (41% income tax plus levies). For self-employed individuals, pension relief will be at a rate of 33% on their income tax return.
  • – Compulsory enrolement will depend on employees having a basic income, and not being a member of an employer’s scheme with greater benefits.
  • – The individual will have authority to decide on the pension fund invested, which will start at a basic low risk fund.
  • – The overall difference is that each member is separately treated, whereas under the current system all contributions go to the general PRSI fund. It is expected that members will receive an annual statement showing their contributions to date, and the value of their fund. It may also be possible to release the remaining value of the fund to one’s personal estate on their death.

In addition, the age at which new entrants qualify for the State pension will increase as follows:

  • – 2014 – 66 yrs
  • – 2021 – 67 yrs
  • – 2028 – 68 yrs

Further details are available from the Department of Social Welfare website and