For any employees who don’t have a pension deduction going through payroll in November, they will automatically enter into auto-enrolment on the 1st January. As a result, employers must act quick if they want to set up a private pension (PRSA or master trust) for employees through salary deduction instead of entering into auto-enrolment. Please note private pension plans may not be the best solution for all employees and there may be instances where employees are better off to go with Auto-enrolment. We have outlined the key considerations and differences between the two arrangements in this article.
AUTO-ENROLMENT – MY FUTURE FUND
Auto-enrolment is a new state-run retirement savings scheme. The goal is to set up retirement plans to ensure that every worker will have a workplace pension to supplement their basic State pension.
Under the scheme, the employee, employer and Government all pay into the employee’s retirement fund, My Future Fund. The newly formed National Automatic Enrolment Retirement Savings Authority (NAERSA) will be responsible for finalising the details before launch on the 1st of January 2026.
As auto-enrolment is a government initiative, employers will have to await for correspondence from NAERSA to get registered and notoifications will be submitted to NAERSA through your payroll provider.
Who is it for?
All employees aged between 23 and 60, earning €20,000 or more that are not already contributing to a workplace pension arrangement, will be automatically enrolled and contribute to My Future Fund.
This includes seasonal and part-time workers and where an employee has more than one job, they will be enrolled if one of those employments does not have a workplace pension.
How does it work?
Contributions will be taken from your gross salary and are outlined in the table below. They will increase the longer the scheme is in place, starting out at 1.5% and increasing to 6%.
Your employer will match this and the Government will also contribute.
| Yearof scheme | Employee Contribution | Employer Contribution | Government Contribution |
| 1 – 3 | 1.5 % | 1.5 % | 0.5% |
| 4 – 6 | 3% | 3% | 1% |
| 7 – 9 | 4.5% | 4.5% | 1.5% |
| 10 + | 6% | 6% | 2% |
Revenue will identify who is eligible from reviewing November payroll and an Auto Enrolment payroll notification will be sent through payroll software. NAERSA will be responsible for collecting contributions, allocating investment returns, operating the online portal and providing any necessary support, the full details of what is offered will be finalised before launch.
Where does my money go?
Three Investment managers, Amundi, Blackrock and Irish Life will be involved in the running of three funds ranging from Low to High Risk and a Default Investment Strategy which all members will initially be invested in. It is expected that the investment management charges will be lower than a private pension arrangement as there is no advice provided.
Do I have to get involved?
If you are eligible then you will automatically be enrolled. After 6 months you have 2 options if you would like to stop contributing:
- Suspend your contributions for 1 – 2 All contributions will remain in the pension.
- Opt-out and take a refund of your Employer and Government contributions will remain in the pension.
You can also opt out after each contribution rate change in the first 10 years.
After 2 years – assuming you still meet the criteria – you will automatically be re-enrolled.
What happens at retirement?
You can withdraw your auto-enrolment pension when you reach State retirement age, which is currently 66.
What if I already have a pension?
If you already have a pension through your payroll then you will not be eligible for Auto Enrolment. If you have a private pension arrangement, then you will be included in the new Auto Enrolment scheme and your personal pension will also continue. You can decide what to do with your personal pension and this will depend on your personal circumstances. We will discuss the differences between My Future Fund and a personal pension (PRSA) in the next section.
Are there any other options and which should I choose?
You could also access a Personal Retirement Savings Account (PRSA) or master trust via your employer. This will involve discussing your financial circumstances with an advisor, deciding how much you would like to contribute each month and filling out the relevant forms to get a policy in place. The PRSA/master trust is available to all employees regardless of age or salary, it is designed to be easy to understand with a simple and clear charging structure while still being flexible to your needs and circumstances. Like Auto-Enrolment the contributions would be taken from your gross salary by payroll. The table below highlights some of the main differences between the PRSA/Master Trust and My Future Fund.
Ultimately which option you chose will depend on your personal circumstances. If you want to contribute more into your pension fund or have income subject to 40% income tax, a PRSA or master trust might be a better option for you. The different tax relief options depending on your income might be the deciding factor. While the PRSA has been set up with simplicity in mind, the ease of setting up your Future Fund may make the decision for you.
| PRSA / Master Trust | My Future Fund | |
| Incentives to join | The money you put into a PRSA or Master Trust is supported by tax relief of either 20% or 40% depending on the rate of income tax you pay. | The State top up on auto- enrolment at a rate of €1 for every €3 of the employee contributions is the equivalent of a 25% tax relief. |
| Employee Contributions | Contribution rates are flexible; they can be increased or decreased, and you can also make additional payments (AVCs) at times that suit you. | Contribution rates are set (table page 1) and cannot be increased or decreased. No additional contributions can be made. |
| Employer Contributions | Employer is not obliged to contribute. Once Auto-enrolment starts, it’s expected that employer contributions to a PRSA will need to match auto- enrolment contributions in time as outlined on page 1. | Contribution rates are set (table page 1) and cannot be increased or decreased. No additional contributions can be made. |
| Retirement | You can access your funds between the ages of 60 and 75 depending on your circumstances. | You can only access at State Pension Age (66). |
| Advice | Financial Advisor is linked to a PRSA to give any advice you might need. | No advice aspect, any admin support will be given by NAERSA. |
| Investment Options | Range of investment options and choice of PRSA providers with options to suit every risk level including a default investment option selected by the provider. | Limited options, 3 funds and a Default Investment option. Annual Management charges are likely to be lower under auto-enrolment. |
| Set Up | Some documentation to be filled out and returned to your financial broker. It can take a number of weeks to get a PRSA or master trust set up as we are required to assess individual employee’s circumstances and provide a statement of suitability for individuals. | Details have yet to be announced but it is expected there should be minimal requirements on your part. |
Further Questions?
If you would prefer a PRSA or master trust pension over auto-enrolment, we recommend you email joanne@hardimans.ie or call Joanne on (093) 70007 to book in for an appointment as soon as possible as we have limited availability left for the rest of the month to set up new pension contracts.
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