When it comes to auto-enrolment, employers pick up the tab...again
It looks like pension auto-enrolment (AE) will finally stumble over the starting line on New Year’s Day, though with this troubled scheme, you never know, writes Nick Mulcahy.
AE has been in the works since an initial Strawman consultation process in 2018, and taking over seven years from conception to implementation speaks volumes about the civil service’s inability to get things done.
Even ahead of the launch date of January 1, 2026, there is more than a whiff of lastminute.com.
The publicity campaign for My Future Fund commenced last July, but there was no sign of a website in November.
Instead, anyone looking up what AE is all about was directed to a sketchy government press release.
AE depends on every employer who does not have a workplace pension arrangement registering their details on the My Future Fund portal.
This was not facilitated until December, a time of year when small company managers are joining in the festive merriment.
It’s not as if the Department of Social Protection, which oversees the AE scheme, hasn’t had time to get its act together.
In October 2019, the broad AE framework was finalised before Covid hit a few months later and most civil servants went AWOL.
In March 2022, AE was resurrected with a promised launch date of January 2024.
Time passed, and it wasn’t until October 2024 that Tata Consultancy Services in Letterkenny, Co. Donegal, was signed on to administer the scheme back-end.
At that stage, the launch of My Future Fund was pencilled in for September 2025.
However, someone had overlooked establishing the National Automatic Enrolment Retirement Savings Authority (NAERSA), the quango charged with running My Future Fund.
So last April, social protection minister Dara Calleary pushed the AE launch date to January 2026 and the recruitment process for NAERSA executives and board members commenced at the end of May.
It took until mid-October to formally establish the organisation.
For employers without a company pension scheme, registration with My Future Fund is compulsory.
In January payrolls, employees aged between 23 and 60 and earning over €20,000 p.a. will be automatically enrolled in the My Future Fund scheme, with a 1.5 per cent levy on their gross pay for their new pension contribution.
This will obviously work out as a pay cut, and yet they are being given only weeks to find out details relating to pension charges and, more importantly, how and when they can access their new pension pot.
Employers will pay a matching 1.5 per cent contribution, rising to 3 per cent in 2029, 4.5 per cent in 2032, and 6 per cent in 2035.
This employment tax is in addition to employer PRSI, currently 11.25 per cent and set to increase to 11.75 per cent in October 2028.
PRSI pays for the contributory state pension, and employers effectively fund two-thirds of the weekly payment.
Now they are being compelled to finance a second national pension scheme too.
The obvious question is — why?
Why should employers be forced to fund their employees’ pensions under AE when they already do so with PRSI?
Individuals without access to a company pension scheme can make the rational choice to save for their retirement using a Personal Retirement Savings Account (PRSA).
There are currently 460,000 PRSA contracts, and 136,400 employers provide PRSA access through payroll.
The nanny state believes that AE will scoop up those individuals who need someone else to look after their best interests.
Perhaps it will, but the UK experience does not inspire confidence.
Social protection minister Dara Calleary pushed the AE launch date to January 2026 and the recruitment process for NAERSA executives and board members commenced at the end of May. (Pic: Sam Boal /Rollingnews.ie)
Britain’s AE scheme, launched in 2012, boasts 13.8 million members, or 46 per cent of the UK’s working population.
However, the proportion who haven’t opted out and are actively contributing is only 13 per cent.
The first review of My Future Fund by the Comptroller and Auditor General, whenever it comes, will be a fascinating read.
