Pension savers will get €4 from the State and their employer for every €3 they put in themselves under a new auto-enrolment pensions scheme being rolled out by the Government.
Social Protection Minister Heather Humphreys announced the reform of the system on Monday that the Government hopes will see more people sign up for pensions.
The Government is facing a pensions timebomb as more people are entering retirement age and living longer, which makes it more and more expensive every year.
However, if the State can encourage more people to start paying into their pension pots from an earlier age, it will ease the pressure on the Exchequer.
The new system will be voluntary, but it will be an ‘opt-out’ rather than ‘opt-in’ choice.
Separately, it was decided last month that the mandatory retirement age will stay at 66.
In order to encourage workers to participate in the new scheme, people who remain in the system will have their pension savings matched on a one-for-one basis by the employer.
The State will also provide a top-up of €1 for every €3 saved by the worker.
This means that for every €3 saved by the employee, a further €4 will be invested by the employer and the State combined.
Ms Humphreys said: “The delivery of Auto Enrolment has been a key priority for me since my appointment as Minister for Social Protection.
“Earlier this year I published the final design principles for the Automatic Enrolment Retirement Savings System for Ireland.
“Since then, a lot of work has been undertaken in progressing its implementation.
“This includes the drafting of the Heads of Bill which I am pleased to say have now been approved by Government.
“This represents a historic milestone in the journey towards enabling people who are currently without occupational pension coverage to save for their retirement.
“After decades of talking about Auto Enrolment in this country, I am pleased to say the AE train is now very firmly on the tracks and leaving the Station ahead of its introduction in early 2024.
The Minister added: “AE is a generational reform in the Irish pensions landscape.
“It will combat pension inertia by turning the present system on its head to one where people will have to consciously ‘opt-out’ of supplementary pension coverage rather than ‘opting in.’ “It is intended not just to get people saving earlier but to support them in that saving process by simplifying the pension choices and importantly by providing for significant employer and State contributions as well.”
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