Auto-Enrolment
Auto enrolment is a system of automatic pension provision that is co-funded through contributions from both the employer and employee, with a further top up contribution made by the State
What is Auto-Enrolment (AE)?
The Government has announced the introduction of Auto-Enrolment (AE), effective from 30 September 2025. Its goal is to supplement retirement income and alleviate pressure on the State Pension by establishing a mandatory retirement savings plan for employees not already enrolled in a pension scheme.
While all public sector employees are part of occupational pension plans, an estimated 800,000 private sector employees, currently without a pension, will be covered by this legislation.
AE will run alongside existing occupational pension plans that meet specific minimum standards, and will be operated through a new centralized savings system managed in partnership by the State and selected providers.
This change will affect all employers, making it crucial for businesses to understand both the immediate and long-term financial implications. Employers must start planning and budgeting for AE implementation by Q4 2025.
What does Auto-Enrolment mean for employers?
Mandatory Participation
Employers must comply with AE requirements by choosing from the following options:
- Using a “qualifying” occupational pension plan.
- Using the new Central AE system.
- Combining both systems for different employee cohorts.
The newly formed Central Processing Agency (CPA) will assess employee eligibility for AE and notify employers about their obligations.
The Role of the Central Processing Agency (CPA)
The CPA will oversee AE by:
- Monitoring employee data to ensure pension contributions are being made.
- Determining eligibility for employees earning over €5,000 in the 13 weeks before AE’s start.
- Issuing Auto-Enrolment Payroll Notifications (APNs) to facilitate correct contributions.
Employer Obligations
Employers must:
- Act on APNs to deduct correct contributions from wages.
- Pay and report both Employee & Employer AE contributions to the CPA.
Contact Us
info@readepensions.com
Employee Eligibility for Auto-Enrolment
Employees aged 23-60 earning €20,000+ annually and not already in a pension scheme will be auto-enrolled. This includes those:
- With life assurance benefits only.
- Awaiting probationary completion before joining a company-sponsored pension.
- Who previously opted out of the company scheme.
Opt-Out Facility
Employees may opt-out after six months or during rate increases. Contributions can be paused but auto-enrolment resumes every two years.
Cost Implications for Employers
Employers & Employees must contribute a fixed % of Salary, that will incrementally rise every three years from go live, with the State contributing a top up payment as well.
| Years | Employee Contribution | Employer Contribution | State Contribution |
|---|---|---|---|
| 1 - 3 | 1.5% | 1.5% | 0.5% |
| 4 - 6 | 3% | 3% | 1% |
| 7 - 9 | 4.5% | 4.5% | 1.5% |
| 10+ | 6% | 6% | 2% |
Further information on Cost Implications for Employers
Immediate & long-term additional costs include:
- Employer contributions for current and future employees.
- Initial setup and communication costs.
- Increased administrative and payroll expenses.
- Future contribution increases for employees.
- Employers must also consider how AE will impact recruitment, retention, and the financial planning of higher-rate taxpayers (those taxed at 40%).
Private Pension Tax Relief v Government Contribution under AE
In the AE system, for every €3 an employee contributes (matched by the employer), the Government will contribute €1. This effectively gives a 25% tax relief on employee contributions.
In contrast, private pensions provide tax relief based on the employee’s marginal tax rate. Higher-rate taxpayers (40%) receive significantly more relief under private pensions than they would through AE, while lower-rate taxpayers (20%) could benefit more under AE.
What approach should Employers use?
Employers’ strategies will vary depending on whether they already offer a pension scheme. If one exists, they may enrol affected employees into the current scheme. If no scheme exists, employers can either establish a new pension scheme or simply enrol employees in the Central AE system.
Whatever the scenario, it is recommended each employer should seek advice around
- Employers pension plan design – cost / benefits analysis to determine best long-term financial approach for Employer.
- Employees’ pension plan design – cost / benefits analysis to determine optimum retirement benefits for Employees.
What next steps should we take?
- Identify affected employees
- Choose the best strategy for meeting AE requirements
- Plan and Budget for 2025 - 2028 financial impacts
- Prepare communications to employees on the pension rollout
- Engage with payroll providers and pension experts to ensure AE compliance
Frequently Asked Questions
No, employees can only opt out after the initial six-month mandatory participation period. Even if they choose to opt out, they will be automatically re-enrolled every two years. Employees may opt out again after each re-enrolment following another six-month mandatory participation period.
Employees’ auto-enrolment pension savings are portable, meaning their contributions and savings follow them to each new job. Different employers will contribute to the same auto-enrolment retirement account, ensuring continuity of savings across jobs.
Employers who already offer a qualifying occupational pension scheme can choose to use their existing plan to meet auto-enrolment requirements. However, they must ensure it meets the minimum standards outlined under auto-enrolment guidelines. Alternatively, they can use the centralized system for specific employee groups.
Yes, employee contributions to the auto-enrolment scheme are subject to income tax. However, the scheme provides a government contribution of €1 for every €3 saved by employees, creating a financial incentive to remain enrolled and save for retirement.
No, auto-enrolment is currently designed for PAYE (Pay As You Earn) employees only. Self-employed individuals are not automatically enrolled and will need to use existing private pension options to save for their retirement.
Alan Hanway MIIPM QFA PTP
Director
alanhanway@readepensions.com
Alan has over 30 years’ experience in the Investment and Pension industry having worked with Irish Pensions Trust, Mercer Human Resource Consulting, CIF, L&P Financial Trustees and Invesco.
Phil O'Donnell AIIPM QFA
Director
philodonnell@readepensions.com
Phil is an employee benefits practitioner with over 30 years' in this field. Phil previously spent over 20 years' with Irish Pensions Trust managing an extensive portfolio of corporate pension clients
Eoin Cullen BBS Msc QFA Grad. Dip CFP®
Financial Planning Director
eoincullen@readepensions.com
Eoin has been providing advice to private clients and companies for the past 15 years. Eoin has held senior advisory roles in Aviva & Willis Towers Watson.
Paul Keogh AIIPM QFA Msc CFP®
Client Services Director
paulkeogh@readepensions.com
Paul is an experienced qualified pensions professional who has more than 40 years' experience working a broad range of corporate and individual clients both in London & Dublin.
Gordon Elders QFA
Client Services Director
gordonelders@readepensions.com
Gordan has been with Reade Pensions since May 2015 and has over 30 years’ experience in the Logistics/Financial Services industry. Previously with IBM, Accru-Felsers and Paddy Power plc. Gordon plays a key role building good working relationships and providing consistent professional service.
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