Mandatory automatic-enrolment (AE) of employees in a central pension fund (or employer retirement plan) is now targeted to launch in 2024. Earlier this year, the Irish government released its design for the proposed AE system. Auto-enrolment legislation is now making its way through the Irish parliament. Please see our latest client update: Auto enrolment vs occupational defined contribution pension provision (issued in November 2022) for details on the potential employer response to these new AE requirements.
The Irish government has also announced proposals to incentivize employees to defer receipt of their State pension beyond State Pension Age (SPA, age 66) and to gradually change the calculation of state pension benefit entitlement to a “total contributions approach” (TCA); both measures are intended to extend working careers.
In addition, the 2022 Finance Bill includes tax provisions under which employer contributions to employees’ Personal Retirement Savings Accounts (PRSAs) would no longer be treated as a taxable benefits-in-kind and Pan-European Pension Plans (PEPPs) would receive the same tax treatment as existing pension products.
The changes to the tax treatment of PRSAs and PEPPs will take effect from January 1, 2023 (assuming the Finance Bill is signed by the president in December as normal). Prospects for the passage of the AE pension legislation are less clear as various issues still need to be resolved. For example, one key AE area where information is lacking is the “quality test” that existing occupational pension plans would need to pass in order to be usable as an alternative to enrolling employees in the central government AE vehicle.
While medium and large firms generally provide retirement plans (nearly all firms surveyed by WTW do so), it is estimated that only 35% of all private sector workers have any retirement savings at all beyond social security.