Ireland is the last country in the OECD to introduce a workplace pension scheme, and it is expected that around 750,000 workers will benefit from auto-enrolment when it finally comes into effect on January 1st.
But some employers are attempting to avoid their responsibilities, and putting themselves at risk of breaching the law.
Every employee aged 23 to 60 earning €20,000 or more will be automatically enrolled from January 1, unless they are in a qualifying company pension. Younger or older workers are able to opt in voluntarily.
Employers will match their employees’ pension contributions and the State will top it up under the new workplace pension scheme.
Contributions start small, at just 1.5% of the employee’s salary, which will be matched by their employer and topped up by the State by 0.5%.
This means that a total of 4.5% of an employee’s earnings will be contributed towards their new pension fund, with only 1.5% coming out of their salary.
The percentages will increase three times over the next ten years, when the employees’ and employers’ contributions will finally reach 6% each, with the State adding an additional 2%.
However, a number of employers have attempted to preempt the new scheme by setting up pension schemes whereby employees contribute only 1% of their earnings, which is much less than the total of 4.5% which would initially be contributed under auto-enrolment.
Other employers are providing incorrect information or ‘token pensions’, but only a fully compliant, payroll provided scheme meets the law’s requirements.
NAERSA, which is in charge of administering My Future Fund, has said that it will actively audit payrolls and monitor compliance with regards to all employees’ eligibility.
The government warned that penalties will be dished out where employers fail to meet their obligations, meaning inaction or half-measures carry real risks.
Minister for Social Protection Dara Calleary said that employees who have been offered a pension scheme recently for the first time should question why they haven’t been offered one in the past. He said they should also compare any new pension being offered with My Future Fund.
Employers are being asked to complete their profiles on the MyFutureFund employer portal ahead of the introduction of auto-enrolment, where they can set up a payment method for contributions.
Companies will also need to inform their employees who have been enrolled of their enrolment date, which can be done using support on the portal.
A Warning to Employers
For any employers thinking about looking for loopholes, the Department of Social Protection reminded them that it is an offence to take any action that “hinders or attempts to hinder” an employee from participating in the scheme.
Cases whereby employees are being illegally obliged to join another pension scheme and prevented from accessing the MyFutureFund scheme will be fully investigated.
