The government has announced major changes to the pensions system in Ireland, including State, private and public service pensions, which aims to address Ireland’s significant retirement savings gap.
The Taoiseach confirmed that the Government's key goals are to "create a fairer and simpler contributory pension system where a person's pension outcome reflects their social insurance contributions, and in parallel, create a new and necessary culture of personal retirement saving in Ireland".
From 2020, a new State pension system will come into place based on a ‘total contributions approach’ (TCA) where a person’s lifetime contribution will more closely match the benefit they receive. Under TCA, a person's contributory pension will be proportionate to the contributions they make, with fair regard for periods of child rearing, full time caring, and periods in receipt of social protection payments.
Although the State pension will be reformed and will remain at the core of the pension system in Ireland, a new retirement savings system is still needed to supplement the State pension.
Minister Regina Doherty said: “It is increasingly evident that most Irish workers are not saving enough, or indeed at all, for their retirement years. Many people will be faced with a serious reduction in their living standards when they retire – a fall in income they clearly do not want.”
This new 'Automatic Enrolment' retirement savings system will be introduced from 2022 to support and encourage personal savings provision. It is intended that employee savings in this scheme will be supported by employer and State contributions.
Under this system, workers will be ‘automatically enrolled’ into a workplace pension scheme with the option to opt-out, should they choose to do so. However, looking at the international experience of similar systems, for example in the UK, once enrolled, workers tend to remain in the scheme.
Automatic enrolment is a natural extension of the payroll process, making more sense for employers to process the majority of these duties within their payroll software. At BrightPay, we have experienced the rollout of auto enrolment in the UK first hand, where we introduced auto enrolment features which enabled users to automate and simplify the entire process.
Thesaurus Payroll Manager will be able to seamlessly cater for Auto Enrolment without any additional costs to the software, and also includes free phone and email support.