Auto Enrolment Archives

How to prepare for the Automatic-Enrolment Pension Scheme

Posted on 29 August 20243 September 2024 by CPAS

This month in Construction Magazine, Susan O’Mara writes that the Governments Automatic-Enrolment Pension Scheme has finally been signed into law and we are working under the assumption that it will start collecting contributions in January 2025.

For Employers, it is crucial for you to be aware of the key details and requirements of auto-enrolment as it may affect your current pension scheme and/or your employees who are not currently in a pension scheme.

How will it work? The scheme will be operated by a new Government body called the National Automatic Enrolment Retirement Savings Authority (NAERSA). We learned recently that Tata Consultancy Service (TCS) has been named by the Department of Social Protection as the preferred bidder to manage the pension auto-enrolment system. Tata Consultancy Services is an Indian multinational information technology services and consulting company headquartered in Mumbai and has a presence in Letterkenny.

Who is Eligible? All employees aged between 23 and 60 years, earning over €20,000 per year will be entered into the auto-enrolment scheme if not already included in an existing pension arrangement.

How much are the contributions? Employers and Employees are both expected to contribute to the scheme, starting at 1.5% & 1.5% employer and employee, rising to 6% & 6% employer and employee over 10 years. This phased approach is to allow employers who do not currently have pensions to adjust to this new cost.

What should employers be doing to prepare? It is important to have an Action Plan in advance of the start date of auto-enrolment.

Employers should conduct a gap analysis of their employees to determine if there are employees not currently included in a pension scheme. If so, what is the plan for these employees? Furthermore, there are other considerations or employers, such as operating waiting periods before offering access to a pension scheme. It may be prudent to cover Pensions in employment contracts.

Important differences between auto-enrolment and existing occupational pension schemes

Are you aware of the differences between the options?

Tax relief – Under auto-enrolment, there is no tax relief as there is in typical pension arrangements. Instead of tax relief however, there is a State top-up, which is equivalent to 25% tax relief. For Employers, running an auto-enrolment scheme alongside another occupational pension scheme, means understanding the two different taxation systems that will apply to payroll. For pension scheme members paying tax at 40%, the current system is more beneficial that the auto-enrolment scheme. While for taxpayers on 20%, the auto-enrolment scheme may have a greater impact on take home pay.

AVC- Additional Voluntary Contributions (AVCS) are an effective way for members to improve their outcomes in retirement, by contributing more to their pensions. AVC’s are not possible under auto-enrolment.

Additional benefits such as death and disability benefits such as sick pay and income protection are valuable benefits for employers attracting and retaining key staff. Such benefits are not available under auto-enrolment.

The introduction of auto-enrolment will benefit a generation of people who otherwise would not have been provided access to a pension scheme or employer contributions. This will ultimately benefit our society in the future, so that we do not have a large number of people solely reliant on a potentially unsustainable state pension.

However, it also offers employers the opportunity to take stock to ensure that they can implement a solution that suits their needs. Talk to your pension provider as soon as possible to ensure that you are ahead of the game.

Contact your pension provider to get expert help.
CPAS are the specialists when it comes to pension provision and financial advice for employers and staff in the construction sector.
CPAS administer the Construction Workers Pension Scheme and the Construction Executive Retirement Savings (CERS).
We can ensure you are Auto Enrolment ready!

Contact Susan O’Mara via email susan@cpas.ie or phone 01 2234949.

Are workplace Pensions complicated?

Posted on 25 June 202425 June 2024 by Susan O'Mara

Pensions have been a hot topic in the media for the past few years, with many articles and discussions about the IORPII Directive and the Government Auto Enrolment Pension scheme, which is now expected to commence in January 2025. In the latest Irish Construction News magazine, SUSAN O’MARA, Business Development Manager, CPAS (CIF Pension Administration Services), explains the latest developments.

These developments should hopefully raise public awareness of the importance of pensions, but when I asked some of my friends who do not work in pensions if they were paying attention to the changes taking place, particularly around workplace pensions, most of them said “NO! – Its boring and complicated.”
Are Pensions too complicated? Perhaps, but let me try and simplify the topic!

Pension explained

The word Pension refers to the payment you get when you retire. However, it has become synonymous with the vehicle where your money is saved or “invested” to provide this payment when you retire. This adds another layer of complexity. But simply put, a pension is:
a) saving money during your working life to provide income later in life when you retire and
b) using that money as a regular income when you retire.
During your working life, i.e. the preretirement phase, you should be regularly making contributions or “investing” in a pension to provide yourself with a sufficient income in retirement. While the State Pension provides an annual income of €12,927 from age 66, for many, that amount would not be sufficient to replace earned income when they stop working.
That part is easy, do you need more than €12,927 in annual income to enjoy your retirement. If the answer is yes, you need a pension.
Here is where it gets complicated, depending on your employment status, you could be investing in an Occupational Pension Scheme, which could be either
defined contribution or defined benefit – or you could be investing in a PRSA.
Each type of pension has its own set of rules regarding who it is for, when you can retire from it how it calculates your benefits. This is where it can begin to seem overly complicated.

Workplace pensions

If you are an employee, and your employer invites you to join their pension – that will be through an occupational pension scheme. It might be Defined Benefit or the most likely offering with be Defined Contribution – but that is outside your control anyway. So do not think twice.
Join the scheme. Easy, not a complicated decision.
One of the main benefits of joining an occupational pension scheme is that your employer will likely contribute to your pension fund as well as you. This means that you can build up a bigger pot of money for your retirement than if you were saving on your own. Another benefit is that your contributions are deducted from your salary before tax, so you pay less income tax. This also reduces the impact of saving for your retirement on your take-home pay. Additionally, an occupational pension scheme may offer other features such as life cover, sick pay or income protection, or access to a range of investment options. By joining an occupational pension scheme, you are taking a crucial step towards securing your financial future and enjoying a comfortable retirement.
To simplify matters even more, when it comes to choosing how your money is invested, one of the aspects of many occupational pension schemes is the ‘default fund.’ This is the fund that your contributions are automatically invested in if you do not make an active choice among the available options. A default fund is usually designed to provide a balanced mix of investments that aim to achieve growth over the long term while reducing volatility and risk.
Typically, a default fund will have a higher proportion of equities (shares) when you are younger and gradually switch to more conservative assets such as bonds and cash as you approach retirement. This is known as a life-style strategy, and it aims to protect your pension pot from market fluctuations when you are close to retiring. Pensions can be complicated, however, if you lucky enough to be included or invited into a workplace pension, then it is simple
– Join.

ABOUT CPAS

CPAS are the specialists when it comes to pension provision and financial advice for employers and staff in the construction sector. CPAS administer the Construction Workers Pension Scheme, the Construction Executive Retirement Savings (CERS).

For more details, contact Susan O’Mara via email (susan@cpas.ie) or phone 01 223 4949.

Have you factored the government’s auto-enrolment scheme into your company’s pension strategy?

Posted on 25 April 202425 June 2024 by CPAS

The Irish government’s pension auto-enrolment scheme due to commence in January 2025. In the latest Irish Construction News magazine, SUSAN O’MARA, Business Development Manager, CPAS (CIF Pension Administration Services), emphasises the importance of employers keeping themselves informed about the latest regulations and requirements relating to pensions.

It is always a good idea for employers to stay up to date with the latest regulations and requirements regarding pensions in Ireland. One of the most important updates for construction employers is auto-enrolment, which is now entering the final stages of its introduction.

The government’s auto-enrolment scheme has been on the cards for many years, and draft legislation is finally in the Dáil. The scheme is scheduled to commence on 01 January 2025, which is later than the mid-2023 date that was originally planned. The scheme, which endeavours to ensure that everyone working in Ireland is saving for retirement, will be co-funded by employers and the state.

Contributions to the scheme will commence at a low rate and incrementally increase over the next decade. Employers will need to ensure they have staff covered within their existing pension arrangements or their staff will automatically be opted into the government’s scheme.

Via the Sectoral Employment Orders (SEO) and previous Registered Employment Agreement (REA), the construction sector has, for close to 60 years, been ahead of the curve on pensions for specified workers anyway.

PROS AND CONS OF AUTO-ENROLMENT

Employers will need to weigh up the pros and cons of implementing auto-enrolment in their business or adapting and utilising their existing occupational pension schemes. One key area for serious consideration is the tax relief system. The current system, which makes pensions very attractive, will be different within the government scheme.

Currently, tax relief is provided to pension members on their contributions at the rate they pay tax. So, if paying tax at 40%, the cost of a €100 pension contribution would be €60. Within the auto-enrolment scheme, there will be no tax relief. Instead, the state will contribute, as outlined below, along with the proposed rates.

From 2025, employees aged 23-60 earning over €20,000 who are not already enrolled in an occupational scheme will be automatically enrolled and will have to opt out if they wish to leave. Workers will have their pension savings matched on a one-for-one basis by their employer. The state will also provide a top-up of €1 for every €3 saved by the worker.

Years	Employee	Employer	State	Total
1 – 3	1.5%	1.5%	0.5%	3.5%
4 – 6	3%	3%	1%	7%
7 – 9	4.5%	4.5%	1.5%	10.5%
10+	6%	6%	2.0%	14%

*Employer contributions and the state top-up will be capped at a maximum of €80,000 of an employee’s gross salary.

There are other factors, such as retirement flexibility, investment choice and access to additional voluntary contributions (AVCs), and the salary cap, which employers should consider before making a decision for their business and their staff.

Currently, there is no clarity within the proposed framework regarding support from the auto-enrolment scheme in terms of member communications. This may yet fall on the employer. Employers with occupational pension schemes already in place may believe there will be no impact on them. However, this may not be the case. Many employers do not invite staff to become members of their pension scheme until they have completed their probationary period. Where this is the case, these staff may fall under the auto-enrolment scheme during this period. There may also be staff who have declined the option to join for whatever reason. They now, too, may be required to opt into the auto-enrolment scheme.

Now is the time for employers to act to ensure that they have sufficient time to consider the options available and to gain an understanding of the differences between their current strategy and what will be required once auto-enrolment is in force.

ABOUT CPAS

For more details, contact Susan O’Mara via email (susan@cpas.ie) or phone 01 223 4949.