Prepare now for pension auto-enrolment

Ireland’s auto-enrolment pension scheme is set to bring major changes to how employees and employers manage retirement savings.

Launching on September 30, 2025,it will automatically enrole about 800,000 workers aged 23-60 who earn over €20,000 annually, and don’t currently have a workplace pension.

While the initiative promises to provide more financial security for employees, it also introduces new responsibilities and obligations for businesses. Here’s what both employers and employees need to know to get ready.

What is auto-enrolment and how does it work?

Auto-enrolment is a government initiative aimed at increasing retirement savings. Eligible employees will automatically contribute a portion of their salary to a pension, which will be matched by their employer and supplemented by a government top-up. 

This will provide workers with a much-needed additional source of income, alongside the State pension, to them when they retire.

The State pension is currently €277 per week and begins at 66. For many, this is not enough to maintain a comfortable standard of living in retirement, and auto-enrolment aims to bridge that gap.

The key details of the scheme are as follows:

Employee contributions

• Employee contributions will start at 1.5% of gross pay
• In year four they will increase to 3%
• In year seven they will increase to 4.5%
• In year 10 they will increase to the maximum rate of 6%

Employer contributions

• Employers will also start by contributing 1.5% of the employee’s salary, rising to 6% over time.

Government top-up

• The government will add €1 for every €3 contributed by the employee, starting with a 0.5% contribution and increasing to 2%.

Contribution cap

Contributions will be capped at €80,000 of gross annual salary, meaning those earning above this will not contribute beyond it.

What are the employer’s responsibilities?

One of the most significant aspects of auto-enrolment is that it is mandatory for employers. From September, 2025, businesses must enrol their eligible employees in a pension plan and contribute to it. It is a substantial shift for many businesses that do not currently offer pension schemes, and there are several steps that employers need to take to prepare:

Review existing pension schemes: If you already offer a pension plan, make sure it is competitive with the new scheme and meets regulatory requirements.

Update payroll and HR systems: Employers need to ensure their systems can handle the new auto-enrolment process and manage contributions effectively.

Communicate with your employees: Start informing employees now about what the auto-enrolment scheme entails and what their options are. Clear communication will prevent confusion closer to the deadline.

Seek professional advice: Talk to a financial adviser to help you navigate the complexities of auto enrolment, helping you to ensure compliance and that the scheme is beneficial for both your company and your employees.

Benefits for Employees

For employees, the introduction of auto-enrolment is largely positive. Many, particularly those on lower incomes, might not have made significant contributions to a pension, relying instead on the State pension. Auto-enrolment changes that by ensuring employees are saving for their retirement automatically. While employees can opt out of the scheme after six months, they will be re-enrolled every two years, with the option to opt out again.

However, there are limits to the scheme. unlike traditional pensions, auto-enrolment follows a more rigid structure, and employees cannOt contribute beyond the €80,000 salary cap, so higher earners will have fewer options for increasing their pension savings. Also, the auto-enrolment scheme does not offer flexibility in selecting specific funds for example, based on ethical or sustainable criteria.

What if your business already has a pension scheme?

If your business already offers a workplace pension scheme, you’re in a good position. Employees who contribute to an existing scheme will not need to be automatically enrolled in the new system. This simplifies compliance for employers and demonstrates they are already ing their employees’ financial wellbeing.

However, it is important for businesses to review current pension schemes to ensure they remain competitive and compliant with the new regulations. Employers may also consider making new employees eligible for their group scheme from the start date of their employment, to allow for a smooth transition when the scheme is introduced. By ensuring that existing pension schemes meet or exceed the benefits offered by auto-enrolment, businesses can avoid complications and continue to attract and retain top talent.

Taxation and Retirement

Currently, the government has indicated 25% of the pension fund can be drawn down tax-free, with the remaining 75% subject to taxation. While taxation details are still being finalised, the scheme will align with existing pension tax rules as closely as possible.

The government has also suggested that additional retirement options, such as annuities, could be developed in the future, offering more flexibility for how employees access their pension savings.

While the scheme promises long-term financial benefits for employees, it introduces new responsibilities for employers. By preparing now, businesses can ensure they are compliant when the deadline arrives, and employees can look forward to a more secure financial future.

Proper planning and understanding of the changes ahead will help both employers and employees make the most of auto-enrolment.