Introducing automatic enrolment in Ireland has been in discussion for over 25 years now. In 2017, the subject arose once again, and the government finally announced that the scheme would commence in 2021. However, a delay caused by COVID-19 meant a delay. Then, on the 29th of March 2022, the details on the planned state pensions Automatic Enrolment scheme were announced.
Auto Enrolment is a pensions scheme for those working in the private sector. It requires employers to automatically enrol eligible workers into the pension scheme. The scheme’s goal is to ensure that those working in the private sector have an income for their retirement, beyond the state pension. The scheme is planned to be phased in over the next ten years.
The scheme will be rolled out in 2024 and all employees aged between 23 and 60, earning over €20,000 a year and are not already in an occupational pension scheme, will be automatically enrolled from 2024. It is key to note that the scheme is not mandatory for employees. It is voluntary, however workers are automatically enrolled, meaning they will have to opt-out should they wish to be excluded. This model has been chosen in the hope that workers will be encouraged to remain in the scheme.
In the scheme, there are three parties which will make contributions towards the employee’s pension pot:
For the first three years, employers will be required to match employee contributions at a rate of 1.5 percent to a maximum of €80,000 earnings. The state will also provide €1 for every €3 saved by the worker.
This means, for every €3 saved by the employee, a further contribution of €4 will be made by the employer and state combined.
The employer and employee pension contributions will be calculated as a percentage of the employee’s income. Rates will start at 1.5%, increasing every three years by 1.5%, until they eventually reach 6% by year 10 (2034).
In essence, this will have little-to-no effect on your accounting software. The changes will come beforehand. It will be your payroll processor’s responsibility to ensure all eligible employees are enrolled in the scheme. Once the payroll is processed, the journals can then be uploaded into your accounting software, such as Surf Accounts.
When the scheme commences in 2024, it will mean a few additional steps in the payroll process. Payroll processors must ensure that all eligible employees have been enrolled into one of the four retirement saving funds that employees will have to choose from. Those employees who do not express a preference, should be enrolled into the default fund.
After 6 months of participation, employees will have the choice to opt-out or suspend involvement. If a person chooses to opt out, they can receive a refund of their contributions. Should an employee decide to opt out, they will only get back their contributions and not the employer and state contributions. Once opted out, the employee will need to be re-enrolled after two years.
To best prepare for the new pension scheme in 2024, we recommend using a payroll software which has experience in Auto Enrolment, such as BrightPay Payroll Software. BrightPay have had auto enrolment programmed into the UK version of their software since 2012. They have thorough understanding of how Auto Enrolment works and have the knowledge and experience to support you through the process.
BrightPay aim to use their knowledge of Auto Enrolment from the UK market to make the introduction of the new scheme as simple as possible for employers and payroll processers. Click here to learn more about BrightPay.
Another advantage of using BrightPay is the direct API integration it has with our bookkeeping software, Surf Accounts. Once your payroll journal has been processed in BrightPay, you can seamlessly upload it into Surf Accounts, with a few clicks. To learn more about this integration, check out our blog: Is efficiency your ultimate goal for 2022? The Surf Accounts and BrightPay integration can help!
Interested in finding out more about Surf Accounts and BrightPay? Book a free demo below.