A new scheme aimed at encouraging employees to save for their retirement will come into effect on the 30th September 2025. It was originally planned to start on Jan 1st 2025. This scheme is called auto-enrolment. Even though it is almost a year away, it is no harm to begin preparing for its introduction. Employers will be required, by law, to comply with the scheme.
What implications will Auto-enrolment have on dealers and their staff? The main thing to be aware of is that employers must match the employee’s contribution. Employees who earn €20,000 or more and are between the ages of 23 -60 will be required to contribute a minimum of 1.5% of their gross salary to the scheme per year. If employees do not meet the age and income thresholds, they have the option to opt into the scheme.
As well as the employer matching the employee’s contributions the government will also pay €1 for every €3 the employee puts in. In year 4 contributions will increase to 3% of gross salary. In year 7 this is further increased to 4.5% and from year 10 onwards, the employee and employer contributions will be 6%.
There are pros and cons to the new Auto-enrolment scheme. The main disadvantage is the extra cost that employers will face. If you are already facilitating an occupational pension scheme for your workforce then the auto-enrolment scheme will not apply.
One good thing about the scheme is that employers will not be involved with the administration of it. The National Automatic Enrolment Retirement Savings Authority (NAERSA) will administer the auto-enrolment scheme, leaving minimal administrative work for employers to do. NAERSA will also act as the caretaker of the employee’s interests and savings.
It is worth noting that employer contributions will be deductible for corporation tax purposes. It is important to be aware that employers who prevent their employees from joining the scheme, or who force their employees to opt out or suspend contributions, may be prosecuted and will be subject to fines and penalties. Withheld or underpaid contributions will attract interest payments. NAERSA will also publish a list of employers who have been convicted of non-compliance.
The reaction among the business community has been generally favourable but there are some concerns about how the scheme will be managed, especially if there is already an occupational pension scheme in place within the workforce.
With 11 months to go before the scheme comes into effect, it would be worth letting staff know what lies ahead for them. You should get familiar with how the scheme will operate so that you can address any issues or concerns your staff may have.
Before I conclude I would like to remind you that the 2024 Service Dealer Conference and Awards is only one month away. It takes place on Thursday 28th November at the Crowne Plaza, Stratford-upon-Avon. Lots of interesting speakers and topics will be covered. There will also be breakout sessions. This event will give you the opportunity to meet like-minded people where current issues facing dealers can be discussed and maybe even solved.
