Auto-enrolment is based on a percentage of your salary or wage. Your employer will be tasked with making a deduction through payroll for each of their employees. It will be introduced in a tiered way.
In the first three years, employees will contribute 1.5% of their salary. This will be matched by the same amount by their employer. The State will then add an additional 0.5% on top of this.
In years four to six, employees will contribute 3%. Again this will be matched by the same amount by their employer while the State will add an additional 1% into the pension scheme. From years seven until nine, the employee will contribute 4.5% of their salary and have this matched by their employer. The State will increase their portion of the contribution to 1.5%. From the 10 year mark onward the employee and employer will pay 6% each and the State will add 2%.
This cumulative approach makes it easier for people to start the scheme when they are younger and delivers more value as the individual ages and, usually, as their salary increases.
On a simple monetary basis it can be understood that for every €3 saved by an employee, the total amount saved will be €7 as their employer will match their payment and the State will add an additional €1. These matching payments are designed to incentivize the employee to remain with the system and to continue to save for their retirement.
If I already have a private pension can I transfer to the auto enrolment scheme instead?
Yes, you can transfer to the auto enrolment scheme if you close your current private pension. You cannot operate both at the same time. The auto enrolment scheme is designed as an alternative for those who do not have a private pension scheme.