Pension procrastination isn’t just confined to some 750,000 workers who haven’t got around to starting one yet, it’s a government problem as well, down to the much delayed auto-enrolment scheme.
From January, the new retirement savings scheme from the State, ‘MyFutureFund’, will be rolled out to help those of us without a work or private pension to help us save for our future.
Except, unlike most advice around pensions that there is no better time to start than the present, the scheme has been a long time coming.
In 2022, Heather Humphreys, then Minister for Social Protection, announced the “historic progress” on auto-enrolment to much fanfare: “After decades of talking about Auto Enrolment in this country, I am pleased to say the AE train is now very firmly on the tracks and leaving the station ahead of its introduction in early 2024.”
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And yet tick-tock-tick, here we are over three years later, still waiting for that train to arrive.
Even well before then, we had plenty of soundings around such a scheme. In 2005, the late Seamus Brennan, then Minister for Social and Family Affairs, noted that in the EU, the states play a central role in the provision of compulsory supplementary pensions, while other countries require workers to participate in an occupational or private sector scheme.
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One variation of the mandatory system that he singled out for discussion was that of New Zealand, who earlier that year, was toying with its own adaptation called auto-enrolment. The beauty of the initiative, referred to as a “soft mandatory” option, was an employee’s choice to withdraw if they so wished.
Two years later, in 2007, ‘KiwiSaver’ as the New Zealand scheme was known, was fully operational, while the UK introduced the scheme in 2012. But even they lag behind Australia, the first country to introduce the retirement savings scheme in 1983.
And so here we are in Ireland, anticipating our own version after more than two decades of government debates, false starts and long, long delays. We are also the last country in the 38 cluster of OECD countries to implement the system. But better late than never, right?
[ What is the auto-enrolment pension scheme and what does it mean for you?Opens in new window ]
Superannuation versus state pension
Alan Purcell, chartered accountant and founder of CloudAccounts, lived in Australia for a time, and has seen how an auto-enrolment scheme can work successfully for the average worker, without a need for a state pension.
“This is what Australia did after they introduced their superannuation scheme in the 1980s. Australian employees are sitting pretty now because of the power of compounding interest and its build-up over time.
“I lived there for just under four years and recently logged into my superannuation account and there’s a fair chunk of change in there now from the compound interest alone. That’s not bad for just three-and-a-half years of contributions, and because the system was so well set up so your money is building over time.
“What we see in Ireland now is the scheme being brought in at very low levels just to get people used to it, and then it will increase over time. But will take a long time before it makes any noticeable change.”
The auto-enrolment drive
As part of Budget 2026, the government has provided €154 million to cover its contributions to the retirement saving of workers as part of its auto-enrolment drive.
The ‘MyFutureFund’ scheme, which should be rolled out from January 1, sees employees aged between 23 and 60 and earning the equivalent of, or more than, €20,000 per annum and are not already contributing via their payroll to a pension scheme, will be automatically enrolled.
Under the scheme, employees will pay 1.5% of their gross income into a personal retirement savings fund and employers will be obliged to match this contribution while the State will also pay a contribution of 0.5%. These contributions increase to 6% from the employee and the employer, and 2% from the State, over a period of 10 years.
What this means is that for every €3 a worker saves, the employer will add €3, and the State will add a further €1 meaning a total of €7 for the employee towards their pension.
The employee can also choose whether to invest these savings into one of three investment funds: high, moderate or low risk.
Those savings plus the investment returns will then be available to the employee when they reach pension age.
Right to opt-out
For the employee who does not want to be part of the scheme, they can opt out after six months and their personal contributions will be returned to them. Where a worker remains enrolled, they can suspend their contributions at any time and resume at any time.
For the worker oblivious to auto-enrolment, they may have noticed a flurry of activity in their own workplace around joining an employer-sponsored pension scheme.
This kind of activity has been commonplace in recent months in anticipation of the MyFutureFund scheme.
Prudence is advised here so employees know they are under no obligation to sign up for their employer’s pension offering over auto-enrolment, especially if the latter is proposing a more lucrative saving. This is more likely to apply to low income workers.
Duties of the employer
But there may also be a cohort of workers who aren’t aware of auto-enrolment because an employer has never offered a pension offering. For these workers, the onus is on the employer to ensure employees can avail of this if no other workplace pension is available.
Last month, the government formally established NAERSA – the National Automatic Enrolment Retirement Savings Authority – charged with managing the new scheme.
Employers must set up a profile on the MyFutureFund portal, which opens next month, and complete the setting up process by the end of December.
This will allow for a payment method for employees to be set up and ready for the payroll run in January, when the first contributions begin. And if they don’t, there will be penalties and even prosecutions, handled by the Workplace Relations Commission.
A long-term vision
Purcell said there are bumps to be expected in the initial roll-out, but a long term vision of how auto-enrolment can work successfully should be kept in mind.
“It will be a cost on employers in the new year, and it’s going to reduce employees net pay because of their own contributions. And this won’t sit well in a cost of living crisis.
“There were no increase in tax bands or tax credits in the last budget, and people have seen that being a challenge to them going into 2026. But auto-enrolment is a Band-Aid that very much has to be ripped off.
“Just back to the Australia anecdote as well, the way they phrase salaries over there is you’ll be on $100,000 plus ‘Super’. It’s a real mentality that’s being built into them. It’s obviously taken a long time for that to turn the corner, but everything over there is just their Super when they talk about their retirement or planning for their retirement.
“They were far better understanding of their pension/ super there than people would in Ireland, generally speaking. And it’s just a very simple process.”
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.
