Hundreds of thousands of private sector workers could be automatically enrolled into a pension scheme, under proposals going to Cabinet.
And the Government is set to pay €1 for every €3 an employee puts into their pension pot as part of a new retirement fund system.
Under proposals going to Cabinet on Tuesday, Social Protection Minister Heather Humphreys will also seek approval for a new auto-enrolment scheme.
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It will see around 750,000 employees aged between 23 and 60 and earning over €20,000, automatically sign up to make contributions to their pension fund if they are not already enrolled in an occupational pension scheme.
Employers will also face an additional cost as they will have to match employees' contributions once the new system is in place, if approved.
A contribution of €3 from an employee will result in €7 into their pension fund.
Their employer will match their €3 and the State will add €1 to the contribution.
Minister Humphreys will aim to seek approval from Cabinet on Tuesday as Ireland is the only country in the Organisation for Economic Co-operation and Development [OECD] that does not have this system in place.
The scheme is also recommended by the Pension Commission, has been recommended by the Citizens Assembly and is in the Programme for Government.
Businesses’ previously had concerns that the proposal would be brought in over a six year period.
However, Minister Humphreys is aiming to bring it in over a 10 year period to give businesses more time to adapt to the system.
Senior sources have said the cost of the scheme to the State will be around €2.5 billion over 10 years.
Employees can opt out of the scheme after six months of being enrolled but the State is hoping the auto-enrolment will encourage at least 90% of people to continue paying into a pension pot.
Only 35% of private sector workers have a pension and the Government is concerned over the level of pension coverage.
A senior source said: “If we don’t act now, we’re facing a situation whereby you’ll have droves of young people entering retirement and they won’t have the financial stability that we believe they will need.”
The Government is hoping that businesses who may kick up over the additional cost, realise that offering someone a pension is a selling point as certain sectors are struggling to recruit staff following Covid-19.
Employer contributions and the State top-up will be capped at a maximum €80,000 of an employee’s gross salary.
Minister Humphreys memo going to Cabinet on Tuesday will seek to begin drafting legislation which could see the new system in place next year.
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