By Dave Kavanagh

After many years and a number of delays, “Auto Enrolment” is due to commence in September of this year and is estimated to affect about 800,000 employees in Ireland. In a drive to make sure that people are planning for their income in retirement, auto enrolment is a process that will commence to deduct a payment from salary from the employee, which will be matched by the employer and have an additional contribution from Government. Initially, this will be 1.5% from the employee, 1.5% from the employer and 0.5% from Government. In years 4-6 this will increase to 3% from employees, 3% from the employer and 1% from Government, rising in years 7-9 to 4.5% from employees, 4.5% from employers and 1.5% from Government, and from year 10 and onwards, 6% employees, 6% employers and 2% from Government.
So who will be included in auto enrolment? Presently, the criteria for inclusion is employees aged 23-60 who earn at least €20,000 per annum and who are not included in an existing pension scheme that is deducted through payroll. So if someone is already included in a company pension scheme, a company PRSA scheme (personal retirement savings account) or even a personal PRSA plan that is deducted through payroll, they will not be included. Self employed people will also be exempt. If someone pays for their own personal pension or PRSA by direct debit from their own bank account, they can continue to do this but will also be included in auto enrolment. Of the 800,000 employees likely to be affected, it is estimated that 200,000 of these are on the higher tax rate of 40% and it is these higher rate tax payers that should consider an alternative option as the benefits to them will not be as good as the 40% tax relief on their contributions to a scheme done through their payroll.

Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can be contacted by emailing info@financialcompanion.ie or use the contact form on www.financialcompanion.ie or @Davekav_advice on Twitter and Instagram. Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing, positivity and motivation. As heard on RTE 2FM , LMFM and TV3.