Ireland's New Auto-Enrolment Retirement Savings System: My Future Fund

Ireland is set to introduce its new Auto-Enrolment Retirement Savings System, ‘My Future Fund’, from 30 September 2025. This marks a significant shift in pension provision. All eligible employees without a workplace pension scheme will be automatically enrolled into a State-managed pension system.

Get Ready for My Future Fund

Employers need to prepare now. Ensuring compliance is vital to avoid penalties. It will also help support the workforce during this transition. Unfortunately, many Irish organisations remain unprepared. Recent surveys indicate that 79% of businesses have yet to implement a clear action plan.

Key Features of My Future Fund

Eligibility Criteria

Employees aged 23 to 60, earning €20,000 or more annually, will be automatically enrolled. They cannot currently be part of a workplace pension to qualify.

Mandatory Contributions

Employee and employer contributions will commence at 1.5% of remuneration in Year 1. This rate increases every three years, reaching 6% by Year 10. The State will also top up contributions. For every €3 an employee saves, the State contributes an additional €1. (*Remuneration is currently capped at €80,000 per annum.)

Portability of Savings

The scheme adopts a ‘pot-follows-member’ approach. This ensures that employees' pension savings remain intact even if they change jobs.

Taxation Details

Employee contributions will not receive tax relief. However, investment returns will be tax-free while the funds are in the scheme. Upon retirement, 25% of the total savings can be withdrawn tax-free. This amount has a maximum limit of €200,000. Any excess will be taxed at 20% for amounts between €200,000 and €500,000. Amounts over €500,000 will be taxed at the member’s marginal rate.

Enforcement Date and Responsibilities

Employers must comply by 30 September 2025. Failure to comply could lead to penalties. The countdown to auto-enrolment is already underway. Employers must act now to ensure payroll readiness.

Preparing for the Transition

To ensure a smooth transition, employers should focus on several key areas:

1. Review Current Pension Policies: Assess current pension offerings and identify gaps. This will help in determining how to integrate with the 'My Future Fund'.

   
   

2. Educate Employees: Inform employees about the new scheme. Clear communication will help alleviate concerns and confusion. Host workshops or informational sessions to explain the benefits.

   
   

3. Allocate Resources: Ensure that the necessary resources are in place. This includes training payroll and HR staff to handle the new enrolment system.

   
   

4. Develop an Action Plan: Create a detailed implementation plan. Outline specific steps, timelines, and responsible parties to ensure compliance by the deadline.

   
   

Winds of Change in Retirement Planning

The new system represents a significant shift in how retirement savings are approached in Ireland. The goal is to improve overall savings rates and provide greater security for individuals in their retirement years.

My Future Fund can lead to a more financially stable future for many employees. It encourages a culture of saving, which is essential in today's economy.

Conclusion

Employers must take proactive steps to adapt to the upcoming changes in retirement savings. The introduction of My Future Fund is a pivotal moment for many in Ireland.

If you would like more information, please do not hesitate to contact us for support!

With the right preparation, businesses can make this transition smoothly. Don't wait until the last minute. Start planning today!