Workers in Ireland will see a cash boost come their way as part of a new scheme that will double pension investments.
Although the final design principles have been finalised for the new Automatic Enrolment Retirement Savings System for Ireland, Minister for Social Protection, Heather Humphreys, explained that the scheme won’t be introduced until 2024, RSVP reports.
Currently, Ireland is the only country in the OECD that does not operate an Auto Enrolment or similar system as a means of promoting pension savings.
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With the new scheme, however, employees will now have access to a workplace pension savings scheme which is co-funded by their employer and the State, with the scheme being designed to help simplify pensions decisions for workers and make it easier for employers to offer a workplace pension.
Participation in the system is voluntary it will operate on an opt-out rather than an opt-in basis - this is to encourage people to participate.
Those that choose to opt-in will have their pension savings matched on a one-for-one basis by the employer. Furthermore, the State will also provide a top-up of €1 for every €3 saved by the worker.
The result will be every €3 saved by the employee, being matched by the employer and the State combined resulting in a further €4 being invested.
This means that when the scheme is fully established, a worker earning €35,000 per annum will accumulate a fund of €293,000 over their working life. This excludes investment returns.
The new scheme will be introduced in a phased manner, with the Department of Social Protection explaining that all employees not already in an occupational pension scheme that are aged between 23 and 60 and earning over €20,000 across all of their employment, will be automatically enrolled.
It is intended that the system will be set up by 2023 for employee enrolments in 2024. The introduction of Auto Enrolment will be very gradually phased in over a decade, with both employer and employee contributions starting at 1.5%.
This will increase every three years by 1.5% until they eventually reach 6% by Year 10 - which is 2034.
This steady phasing allows time for both employers and employees to adjust to the new system.
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