Auto-enrolment window still tight despite three-month deferral, says Mercer

Irish Times

05-05-2025

Employers have been urged not to long-finger preparations for the introduction of a mandatory
workplace pension scheme
after the Government announced a three-month delay in its introduction.
Caitriona MacGuinness, DC and private wealth leader at
Mercer Ireland
, said a delay had been widely anticipated in recent weeks after employer groups and payroll service providers had told the Government in a series of meetings in recent weeks that they may not be ready in time for the originally-planned September 30th start date for pension auto-enrolment.
'A common theme emerging from discussions with clients in recent months was that the implications of AE (auto-enrolment) were more complex than originally anticipated,' Ms MacGuinness said.
'The September 30th start date, following so closely after the summer months, was also placing considerable pressure on employers to communicate effectively with employees. The delay now gives some welcome breathing room.'
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However, she warned companies needed to continue to work towards implementation.
'The timeline to the introduction of auto-enrolment remains fairly short, especially when you consider the summer months,' she said. 'I think January 1st is achievable, but there is a lot to do.'
The danger is, with the logic of a January 1st start now generally accepted, any further delay would see the whole project put back by a full year.
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Hitting the new target requires the Government also to move quickly on decisions in its control, like the appointment of investment managers, she said.
Auto-enrolment will mean all workers aged between 23 and 60 who earn above €20,000 across one or more employments automatically enrolled in a private pension scheme, called
My Future Fund
. They will initially pay 1.5 per cent of their gross salary into the fund with that figure matched by their employer and the State adding €1 for every €3 the worker invests.
Contributions will rise to 3 per cent in 2029, 4.5 per cent in 2032 and 6 per cent from 2035. Around 800,000 workers across the State are expected to be affected by the move.
One of the more difficult challenges is for employers who already operate an occupational pension scheme but who have staff that are not signed up to it – either by choice or because they have not completed a probationary period.
Many employers are keen to avoid the cost and administrative burden of running two separate pension schemes. Widening their current arrangements to accommodate all staff is seen as the preferred option, but they cannot force staff who have opted out previously to now join.
Ms MacGuinness said the early and extensive communication with employees is essential in such cases. 'Encouragement is the watchword,' she said. 'Some have been very successful in persuading their employees, but there is no standard approach. It depends on the number of holdouts as a proportion of the overall size of the existing scheme.'
Employers can either persuade all staff to join the existing scheme as is, adjust the rules of the scheme to permit them to join at the contribution rates that will be mandated under auto-enrolment or set up a parallel option under the centralised auto-enrolment programme.
On the challenge of explaining to staff how the scheme will work and its impact on their take-home pay, she said: 'It is complex to explain to employees, but people will become aware of the benefits over time.
'We just have not seen sufficient take-up of employees saving for their futures.'
Ms MacGuinness said employers should have made all necessary strategic decisions no later than July of this year with employee engagement completed no later than November to allow for onboarding of staff, especially where they will be joining existing schemes.