Business Plus



Recent Standard Life research found that over 70% of survey respondent­s are unaware of the auto-enrolment (AE) pension scheme the government has promised to introduce in 2024. The scheme aims to increase pension coverage amongst an estimated 750,000 workers without any form of occupation­al pension coverage. Eight out of ten survey respondent­s said they have not received sufficient informatio­n about the scheme planned to launch next year.

Minister Heather Humphreys signalled that under AE a person can only have one pension pot. This means an employee will be in a position to either avail of auto-enrolment or a private pension, but not both.

“Employers will need to decide if they should enter the new system or obtain a flexible traditiona­l occupation­al pension scheme,” says Stephen Gillick, a lawyer on the Mason Hayes & Curran pensions team.

Gillick advises that employers should begin to consider what approach they will take once auto-enrolment comes into operation. “Certain characteri­stics of each scheme may be more appealing than the other, depending on the needs and wants of the employer,” says Gillick.

“For example, some employers may choose to obtain a traditiona­l occupation­al pension scheme as it affords generous tax relief. In addition, contributi­ons made under traditiona­l schemes offer much greater flexibilit­y including Additional Voluntary Contributi­ons, whereas the proposal for auto-enrolment operates under a much more rigid structure.”

The sufficienc­y of the retirement benefits that will be provided by autoenrolm­ent is a concern. However, Gillick points out that employees who pay no tax, or are taxed within the lower rate of 20%, may benefit from the state subsidy under the auto-enrolment scheme, which works out at effective relief at the rate of 25%.

Where an employer chooses a traditiona­l occupation­al pension, including a master trust, the administra­tion work is typically handled in full by the pension provider, such as a life office.

Employers who decide to avail of the auto-enrolment scheme will be responsibl­e for recording and managing the data related to their participat­ing employees, though the Central Processing Authority will be responsibl­e for the vast majority of the administra­tion work for the AE system.

In terms of auto-enrolment contributi­ons, the present proposal is that for every €3 that an employee contribute­s, the employer must also contribute €3, while the state will contribute €1. Contributi­on rates increase over a 10-year period, starting at 1.5% and capping at 6% of the employee’s income.

“Employers should now begin to weigh up the benefits of each system from a financial and resourcing perspectiv­e and make an informed decision,” Gillick advises. “Employers may also wish to review any template contracts they might have which may need updating to reflect any changes and to ensure terms will not hinder implementa­tion of the new system.”

 ?? ?? The sufficienc­y of the retirement benefits that will be provided by autoenrolm­ent is a concern, say some experts
The sufficienc­y of the retirement benefits that will be provided by autoenrolm­ent is a concern, say some experts

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