{"id":263119,"date":"2026-01-02T09:14:07","date_gmt":"2026-01-02T09:14:07","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/263119\/"},"modified":"2026-01-02T09:14:07","modified_gmt":"2026-01-02T09:14:07","slug":"if-you-earn-more-than-e20000-you-will-now-have-to-pay-into-a-pension-scheme-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/263119\/","title":{"rendered":"If you earn more than \u20ac20,000 you will now have to pay into a pension scheme \u2013 The Irish Times"},"content":{"rendered":"

More than 20 years after it was first mooted and just days before it went live, almost inevitably, the State was continuing to tinker with the rules for auto-enrolment<\/a>, the mandatory workplace pension<\/a> that came into force on January 1st. <\/p>\n

As people return to work<\/a> following the Christmas break, more than 760,000 will find themselves automatically enrolled in the scheme, which is designed to ensure they have some private pension income in retirement alongside the State pension.<\/p>\n

Many of them still have little idea of what is coming. Some will realise only when they see the deduction on their payslips.<\/p>\n

Essentially, everyone who is aged between 23 and 60 and is earning more than \u20ac20,000 a year will be signed up to the new arrangement if they are not already enrolled in an occupational pension scheme at work.<\/p>\n

That \u20ac20,000 counts earning from all employers, so if you work for two or more people, Revenue<\/a> will look at what they pay you between them. And if you are signed up to a workplace pension with one or more of those employers, you will still find yourself enrolled in the mandatory scheme \u2013 called My Future Fund \u2013 in respect of any other employments.<\/p>\n

To further complicate matters for employers, people who fall outside the criteria \u2013 because they are younger than 23, older than 60 or earn less than \u20ac20,000 \u2013 can still request membership through their employers. And the employers will have to accommodate them.<\/p>\n

This will likely be relevant for people who are working part-time \u2013 women for the most part.<\/p>\n

It is not just the workers who are still unaware of what is coming. Talking to many small business owners in recent weeks, it is quite clear that many of them are only now waking up to the implications \u2013 and the cost \u2013 of what is coming down the line imminently.<\/p>\n

In part, this is down to human nature. Even where people logically see the sense of forward planning, many often only engage fully when something actually impacts them. And in the modern world where people get their \u201cnews\u201d from a wide range of sources, running large-scale information campaigns \u2013 as the Government has attempted to do in recent months \u2013 becomes even more complex. <\/p>\n

[\u00a0Calleary blocks employers looking to sidestep pension auto-enrolment for their workersOpens in new window<\/a>\u00a0]<\/p>\n

Communication was seen as key in ensuring worker buy-in to a scheme that will cost them upfront but deliver more secure finances in their retirement. The responsibility for that rests largely with employers. Trying to explain to workers in the middle of an ongoing cost of living crisis<\/a> why there is less than they expect in their pay packet was never an easy job. The evidence \u2013 anecdotal as it is \u2013 suggests many simply did not get around to it.<\/p>\n

That is likely to present all sorts of issues as pay packets land over the next few weeks.<\/p>\n

Many employers will, with some justification, argue that they themselves were in the dark until relatively late in the day.<\/p>\n

Much of the architecture and the formal confirmation of how the scheme would work came much later than would have been ideal. Structures that have taken years to put in place in other countries were created in a matter of months.<\/p>\n

The overarching body \u2013 the National Automatic Enrolment Retirement Savings Authority<\/a> (Naersa) \u2013 was only put in place at the end of August. Employers were not even able to start registering their details until the notoriously short and chaotic December.<\/p>\n

However, employers are far from blameless. The last-minute change in rules governing who would be captured by auto enrolment came about because some businesses chose to game the scheme.<\/p>\n

[\u00a0Average worker faces \u20ac30,000 drop in income if relying on State pension alone, Minister warnsOpens in new window<\/a>\u00a0]<\/p>\n

Originally, the plan was that anyone who was a member of an occupational pension scheme \u2013 with contributions paid through company payroll \u2013 would be exempt.<\/p>\n

Some employees in companies that had occupational schemes had not signed on to them for one reason or another. In some case, it was because of vesting periods which locked them out for a year or two; others were serving probationary periods. <\/p>\n

Both groups would fall under the remit of auto-enrolment unless employers changed the rules of their in-house schemes \u2013 a complicated process. There were also those who simply declined to join despite the obvious financial benefit.<\/p>\n

In the event, whistleblowers contacted the Department of Social Protection<\/a> to let it know that a small number of employers were signing staff up to in-house schemes \u2013 at times without their consent \u2013 with just a token employer contribution and no financial input from the worker.<\/p>\n

It was, quite clearly, an effort to use the occupational pension fund loophole to sidestep auto-enrolment. The Minister, Dara Calleary<\/a>, responded by amending the rules in the face of strong opposition from business lobby groups. <\/p>\n

If contributions to occupational pension schemes did not at least match the structure of auto-enrolment, the workers concerned would still be enrolled in the new mandatory workplace pension scheme, the Minister ruled.<\/p>\n

What are those contributions and how will the scheme work?<\/p>\n

Under auto-enrolment, from this month employers will have to contribute to the fund at 1.5 per cent of a worker\u2019s gross earnings. That figure will be matched by the worker \u2013 although, as their contribution comes from their net pay packet, the actual impact on their take-home pay will be slightly higher than 1.5 per cent (see tables).<\/p>\n

The State will add \u20ac1 to the fund for every \u20ac3 put in by the worker \u2013 0.5 per cent of the worker\u2019s gross pay at the outset.<\/p>\n

So all told, from Day 1, 3.5 per cent of a worker\u2019s pay is going into My Future Fund. Of that, 55 cent a week will be deducted to fund Naersa, which is overseeing the fund and its management. <\/p>\n

The contributions all go into the My Future Fund, where they are invested for the worker over time before they are drawn down as a pension when the worker retires.<\/p>\n

A pension contribution of 3.5 per cent is better than nothing, but it will not deliver a meaningful pension. For that reason, contributions will increase every three years up to 2035.<\/p>\n

From 2029, the contribution of the worker and the employer will rise to 3 per cent, with the State adding 1 per cent for a total pension contribution of 7 per cent.<\/p>\n

In 2032, that rises again, to 4.5 per cent from the employer and the employee and 1.5 per cent from the State \u2013 10.5 per cent of gross pay in total. And, from the start of 2035, the worker and company will pay 6 per cent of gross pay, with the State topping that up with its own 2 per cent contribution.<\/p>\n

At that point, 14 per cent of gross pay will be going into your pension fund \u2013 which is a significant pension investment and should meaningfully alter the retirement finances of most workers.<\/p>\n

Employees starting work in the coming years will pay whatever contribution rates are in force at that time. <\/p>\n

Any employer offering a defined contribution occupational pension scheme will need to ensure that contributions to the scheme at least equal 3.5 per cent of a worker\u2019s gross pay. And of that, the employer must pay at least 1.5 per cent of gross pay or \u20ac1,200 in a year, whichever is the lower. Those thresholds may rise in future years.<\/p>\n

Are you obliged to stay in the scheme? No, though it makes sense unless you really are pinned to your collar financially.<\/p>\n

You must stay in the scheme \u2013 and pay into it \u2013 for the first six months. If you want to step away at that point you can do so, as long as you make the decision in the following two months. Miss that window and you will be locked in \u2013 at least for the first three years.<\/p>\n

If you do opt out, you will have your contributions refunded.<\/p>\n

You can also opt out six months after each increase in contributions \u2013 so in July or August of 2029, 2032 and 2035. If you do, what will be refunded to you is the difference between what you paid at the previous contribution level and what you have paid over the previous six months at the new one.<\/p>\n

[\u00a0How can I find what my likely State pension will be?Opens in new window<\/a>\u00a0]<\/p>\n

In either case, the money that was paid in on your behalf by the employer and the State will remain invested (although no further contributions will be made), so you will get some very modest pension on retirement at the age of 66.<\/p>\n

You can also suspend contributions at any time after the first six months for anywhere between one and two years if you find yourself facing temporary financial pressures.<\/p>\n

In that case, contributions already made will not be refunded. They will continue to be invested on your behalf alongside employer and State payments. <\/p>\n

Even if you do opt out, or suspend your contributions, you will find yourself re-enrolled two years later as long as you continue to meet the criteria for eligibility outlined above.<\/p>\n

What happens to the money in the fund?<\/p>\n

The worker will have a say in how it is invested. Initially, it will default to what is called a life cycle strategy. This sees your money invested disproportionately in higher-risk assets in your younger years, moving to a more conservative investment strategy as you age and move closer to retirement.<\/p>\n

You will have a choice to dictate whether you wish to remain with the default strategy, or move to a low-risk, medium-risk or high-risk strategy. This will be done through the My Future Fund portal, to which you will have password access and where you can see how your fund is doing.<\/p>\n

When you hit 66, you will be able to draw down your funds. Initially that will be as a lump sum, but over the next few years it is expected that other options will be put in place.<\/p>\n

Auto-enrolment is designed to address what is feared to be an impending demographic crisis<\/a> as the cost of caring for a growing number of older people on the State pension threatens to overwhelm the exchequer.<\/p>\n

It is a model that is now common worldwide \u2013 especially among wealthier OECD states, where Ireland is an outlier in not having something along these lines in place.<\/p>\n

Teething problems are inevitable as people come to terms with the cost of the scheme on their regular budgeting, tardy employers register for the scheme, and the regulator chases down those looking to dodge the system. But, longer term, even though there is no Government guarantee on the funds, auto-enrolment is designed to force workers and employers to take the steps required for some financial peace of mind in their later years.<\/p>\n","protected":false},"excerpt":{"rendered":"More than 20 years after it was first mooted and just days before it went live, almost inevitably,…\n","protected":false},"author":2,"featured_media":263120,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[177],"tags":[21434,79,2190,21560,20812,18,2215,18470,19,17,21435,2987,234,235,1900,80],"class_list":{"0":"post-263119","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-auto-enrolment","9":"tag-business","10":"tag-cost-of-living","11":"tag-dara-calleary","12":"tag-department-of-social-protection","13":"tag-eire","14":"tag-for-you","15":"tag-ibec","16":"tag-ie","17":"tag-ireland","18":"tag-isme","19":"tag-pension","20":"tag-personal-finance","21":"tag-personalfinance","22":"tag-revenue-commissioners","23":"tag-work"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/115824745690091246","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/263119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=263119"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/263119\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/263120"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=263119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=263119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=263119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}