Understanding Automatic Enrolment and Its Impact on Employees

Automatic enrolment (AE) is a new retirement savings system for employees that will be introduced on 1^st January 2026. Many employees do not have a pension scheme, which means that they will be relying on the State Pension when they retire. This means that they will have extra money when they retire and won’t have to rely on the State Pension alone.

Eligibility criteria

Employees 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.

Those outside the earnings and age cohort, and who aren’t already in a pension scheme, will not be automatically enrolled, but they may choose to opt in if they wish.

Contribution rates           

Contributions will be phased in so that everyone can get used to the new system without a steep change in income.

Employee contributions will start at 1.5% of gross pay,

All employee contributions will be matched by their employers up to an earnings threshold of €80,000.

The State will also contribute – for every €3 that an employee puts in, the employer will also put in €3, and the State will top up by €1.

Years	Rates
1 – 3	1.5%
4 - 6	3%
7 -9	4.5%
10 onwards	6%

 Option to opt out for employees.

All eligible employees will be automatically enrolled in the scheme. Employees will be able to leave the system or pause their contributions after 6 months but will be automatically re-enrolled after two years if they are still eligible.

Employees who OPT OUT after 6 months will be able to apply for a refund of their contributions. However, the contributions made by the employer and the state will remain in the pension fund and are NOT refundable.

Contributions

Employee contributions will be taken from net income, after deductions of income tax, PRSI and USC.

Tax relief won’t apply in respect of these contributions. The State will top up the pension fund at 33% of the employee contribution.

Participants in the new scheme will still be entitled to receive a ‘benefit-in-kind’ tax exemption in respect of their employer’s contribution.

Benefits for employees

• More money in retirement

• Contributions will be boosted by matching employer contributions and State top-up.

• If employees move jobs they can keep paying into the same account

• Employees won’t have to make an investment decision as there will be a default fund.

• Employees will be able to view their account on an online portal.

• Contributions and investment returns will be the employee’s property, protected under the Constitution and therefore cannot be accessed by anybody else.

• The large number of participants and money that will accumulate in the system over time will ensure that shared costs and fees can be kept to a minimum.