Auto-Enrolment Proposal: Employer Administrative Headache Ahead?

• Law Firm: William Fry
• Subject Matter: Employment and HR, Retirement, Superannuation & Pensions, Employee Benefits & Compensation
• Author: Mr Ian Devlin, Ciara McLoughlin, Jane McKeever and Jane Barrett
• Published date: 10 March 2023

As per our October 2022 briefing, auto-enrolment (AE) is to be introduced in Ireland following approval of the General Scheme of the Automatic Enrolment Retirement Savings System Bill (AE Heads of Bill).

Since approval, the AE Heads of Bill have been progressing through the Irish legislative process with several key stakeholders (the Pensions Authority, Insurance Ireland & the ESRI) contributing to the latest stage of pre-legislative scrutiny of the Heads. In this briefing we consider the key themes emerging from the ongoing legislative process.

Next steps

The AE Heads of Bill, which set down a high-level outline of the form of AE to be introduced in Ireland, will need to be translated into draft legislation and enacted before the Irish AE scheme is established. As such, AE proposals are still at a relatively early stage and the Heads of Bill are open to amendment. However, and despite the criticism of the ambitious timeline, the Government is resolutely keeping to the 2024 target roll-out date for now.

Background

AE provides for auto-enrolment in a workplace pension of employees between the ages of 23 and 60 and earning more than '20,000. The system would operate on an 'opt-out' basis which means, in broad terms, that employees who wish to 'opt-out' can only do so after being enrolled for 6 months and at which point they would be refunded their contributions but then re-enrolled periodically. The introduction of AE is expected to result in the enrolment of 750,000 employees in a new workplace pension scheme. This number is expected to grow significantly over time.

Key themes

• Age/Salary Criteria
  • proposed age criteria of 23 has been cited as high by international standards and as having the potential to discriminate against those entering the workforce without first attending third level education.
  • proposed qualifying salary of '20,000 has also come in for criticism as being too high a threshold.
• The Gender Pensions Gap
  • several stakeholders consider the AE proposals (as currently drafted) have the potential to exacerbate the gender pensions gap in Ireland e.g., a qualifying salary of '20,000 could result in the exclusion of part-time, hospitality and care workers, which would disproportionately impact women.
  • AE Heads of Bill do not envisage any facility for payment of voluntary or additional employee contributions to top up retirement savings after periods of absence from the workforce.
• Tax Structure
  • use of a State top-up tax incentivisation...