What Employers and Employees Need to Know?
After years of discussion, Ireland is finally set to roll out its long-awaited auto-enrolment pension scheme in 2026 (January 2026). Designed to tackle the country’s pension coverage gap, the scheme will automatically enrol eligible workers into a state-facilitated retirement savings plan. This is a landmark development in Irish retirement planning, but it also raises important considerations for both employers and employees, especially when compared with existing private group pension schemes.
What Is Auto-Enrolment?
Auto-enrolment means that employees who do not already have a pension will be automatically signed up for one. Importantly, if you have a pension in place then you don’t have to set up and contribute to Auto-Enrolment when it eventually lands.
Contributions will be made by the employee, employer, and the State, with funds managed by a central administration authority (Currently getting set up by the State). The goal is to boost pension savings among the private workforce, particularly younger and lower-income earners.
I think Ireland is the last or one of the last OECD Countries to implement a State Pension and its desperately needed! Only circa 60% of the population have some form of private pension outside of the State Pension and in most cases that pension is tiny and not going to sustain that individual into retirement. The State Pension is a little north of €14,000 and with life expectancy from aged 65 at nearly 25 years for females, we really do have a ticking time bomb!
Key Features of Auto Enrolement
- Eligibility: Employees aged 23–60 earning over €20,000 annually and not already in a pension scheme.
- Employee Contribution: Starting at 1.5% of gross earnings, rising to 6% over 10 years.
- Employer Match: Employers will match the employee contribution up to a cap.
- State Top-Up: The State adds €1 for every €3 contributed by the employee. This is good for lower paid individuals but for people on the higher marginal rate of tax you are better in a Private Pension (Tax relief at 40%)
- No Need for Action: Employees are enrolled automatically but can opt out after 6 months (with re-enrolment after 2 years).
Employer Considerations & Obligations
- Mandatory Participation
If an eligible employee is not already in a pension scheme, the employer is legally required to auto-enrol them. This means:
- Assessing existing pension coverage in your organisation.
- Budgeting for employer contributions (starting at 1.5% and increasing over time).
- Adapting payroll systems to integrate with the auto-enrolment platform.
- No Substitution for Private Schemes
Auto-enrolment does not replace existing group schemes. If an employer already offers a qualifying pension, they are exempt from enrolling staff in the State scheme. This is crucial for employers to understand: maintaining a robust private scheme avoids the administrative burden of auto-enrolment and is often more beneficial for staff.
- Compliance Monitoring
Employers will be subject to compliance checks, and failing to enrol eligible employees could result in penalties or sanctions.
- Impact on Staff Retention and Value Proposition
Offering a superior private pension scheme is a competitive advantage. With auto-enrolment being quite basic, retaining or enhancing a group scheme is likely to be more attractive to skilled professionals. In all honesty as pension experts in business for 30 years now we don’t think there is a comparison to a Private Scheme which will cost the employer roughly the same but offers a far superior suite of benefits. access to a second opinion doctors service which is a world-class second medical opinion service. This gives employees and their families the opportunity to consult with over 50,000 leading global specialists—providing clarity, reassurance, and expert guidance on diagnoses and treatment plans at no extra cost. In addition, the scheme includes a confidential counselling service, offering professional mental health support to help employees manage stress, anxiety, bereavement, and other personal challenges. This valuable resource promotes emotional wellbeing and helps foster a resilient, supported workforce and it is included with most of the main providers plans in Ireland these days.
Auto-enrolment is a welcome baseline—but for flexibility, tax efficiency, and real value, private pension schemes remain the gold standard.
Employee Considerations for Auto-Enrolment “My Future Fund”
- Automatic Savings
For employees who have never engaged with pensions, this is a positive step it means automatic retirement savings, even for those who wouldn’t have opted in themselves.
- Cost and Contributions
Contributions will be deducted from salary, and although modest at first, they increase to 6% over a decade. The State’s top-up helps but overall benefits may be modest, particularly for higher earners.
- Limited Investment Choice
Under auto-enrolment, fund choices are restricted and centrally managed. Employees won’t have the same level of investment flexibility they’d find in a private group scheme.
- Basic Retirement Options
Auto-enrolment retirement options are still being finalised, but early indications suggest less flexibility in terms of drawdown strategies and Approved Retirement Funds (ARFs) compared to private schemes. It appears to us that Auto Enrolment is a positive step but a little “clunky” in terms of flexibility for staff around pension contributions and retirement.
Overall if you’re a higher paid individual or have staff earning in the higher tax bracket you are better in a Private Pension.
Comparing Auto-Enrolment vs. Private Group Pension Schemes
| Feature | Auto-Enrolment Scheme | Private Group Pension Scheme |
|---|---|---|
| Tax Relief on Contributions | Indirect (via State top-up) | Direct tax relief at marginal rate (up to 40%) |
| Contribution Limits | 6% employee max (plus employer & State) | Flexible – often higher contribution ceilings |
| Employer Control & Branding | None – State run | Full control over provider, investment options, and communication |
| Investment Flexibility | Limited | Wide choice of funds and risk profiles |
| At Retirement Options | Expected to be limited | Access to ARFs, annuities, and tax-free lump sums |
| Staff Attraction & Retention | Basic benefit | Considered a key part of a competitive reward package |
Why a Group Pension Scheme Is Still the Gold Standard
While auto-enrolment is a positive development for broad pension inclusion, it’s not designed for employees or employers who want flexibility, control, and maximum tax efficiency.
For higher earners, auto-enrolment is significantly less attractive. The lack of direct tax relief (at 40% for higher-rate taxpayers) means they’re missing out on a major incentive. Private pension schemes, on the other hand, offer:
- Full tax relief on contributions up to age-related limits
- Flexible employer contribution strategies
- Customisable plans that can reflect your company culture
Final Thoughts
Ireland’s auto-enrolment pension is a necessary step toward closing the pension gap—but it’s a baseline, not a premium solution.
For employers, now is the time to:
- Audit your current pension offering
- Weigh the benefits of retaining or upgrading your private scheme
- Communicate clearly with staff about their retirement options
And for employees, it’s worth understanding how much more a private pension could offer, especially when it comes to tax efficiency and retirement freedom and the auxiliary benefits, we can tag in to help with retention.
Want Help Navigating Your Pension Options as an Employer?
We’re here to help. Whether you’re considering implementing a group scheme or need to ensure compliance with auto-enrolment, our team can guide you every step of the way.