So what will auto-enrolment in Ireland entail?
It basically means that all eligible employees will be automatically enrolled in an approved pension scheme with their employers. Contributions will come from the employee, employer and the state likely via a credit-based system. It has been suggested that the rates they want to achieve are 6%, 6%, and 2% respectively.
Currently, only 35% of the private sector have pension savings. I am delighted that the government is finally addressing this issue which can only benefit the citizens of the state in the long term.
We would recommend that any employers in the SME sector start addressing the financial implications that Auto Enrolment will have on their business. They can do that by building in a plan to introduce it sooner rather than later. What we are likely to see after the introduction of Auto Enrolment, are more competitive employee benefits packages being used to attract (and retain) employees, more so than they are now. So when a potential employee is analysing an offer from two companies, for instance, the employee benefits offered will be a more significant factor in their decision as all employers will have to offer some sort of package – Auto Enrolment being the minimum. Businesses will have to gear themselves up to ensure they can remain competitive in attracting the person they want.
A sharp fall in pension coverage is cause for concern for all of us because they increase in reliance on the State pension will place even more pressure on already strained resources. Therefore, auto enrolment is seen as a viable solution to the pension problem and could encourage people to be more financially aware of the importance of saving for their retirement.
If you need advice in relation to employee benefits and pension schemes, please call us today.
Also, you could read about this issue furth on Zurich Life’s website. https://www.zurich.ie/pensions-retirement/faqs/what-is-auto-enrolment/