Ireland's Auto Enrolment Pension Scheme: Everything You Need to Know (2025 Onwards)

Introduction

Starting in 2025, Ireland will introduce the Auto Enrolment Pension Scheme (AEPS), a new mandatory pension system designed to ensure that more workers save for retirement. This scheme will automatically enroll employees who meet certain criteria, with contributions made by the employee, the employer, and the Irish government.

If you're working in Ireland, it's essential to understand how this pension scheme affects you, how much you'll contribute, and when you can access your pension savings.

1. What is the Auto Enrolment Pension Scheme (AEPS)?

The Auto Enrolment Pension Scheme is a mandatory workplace pension system that will automatically enroll eligible employees into a pension fund. The scheme is designed to supplement the State Pension, ensuring that workers have additional retirement savings.

Unlike voluntary pension schemes, AEPS does not require employees to opt-in they will be automatically enrolled unless they actively choose to opt out.

Key Features of AEPS:

Automatic Enrollment - Employees who meet the criteria will be enrolled without needing to sign up.

Contributions from Employee, Employer, and Government - All three parties contribute to the pension fund.

Opt-Out Option - Employees can choose to leave the scheme after six months.

Gradual Increase in Contributions - Contribution rates will rise over time.

2. Who is Eligible?

To be automatically enrolled, an employee must:

Be aged between 23 and 60 years old.

Earn €20,000 or more per year (from one or multiple jobs).

Employees who do not meet these criteria will not be automatically enrolled but may still join voluntarily if they wish to save for retirement.

3. How Much Will You Contribute?

The contribution rates will start low and gradually increase over time. Contributions are divided among:

Employee Contribution - A percentage of your salary.

Employer Contribution - The same percentage as the employee.

Government Contribution - The State will top up the employee's contributions by €1 for every €3 contributed.

Contribution Rates (2025-2034)

Example Calculation (2025)

If an employee earns €30,000 per year, their 1.5% contribution would be €450 per year.

The employer would match this with another €450.

The government would add €150 (one-third of the employee's contribution).

Total pension savings = €1,050 per year.

As contribution rates increase, pension savings will grow significantly over time.

4. Can You Opt Out?

Yes, employees can opt out after six months if they do not wish to participate. However, there are some important consequences:

Only employee contributions are refunded.

Employer and government contributions are lost (they remain in the pension system).

Employees who opt out will be automatically re-enrolled every two years, unless they actively opt out again.

If you opt out, you lose free money from your employer and the government! Staying in the scheme maximizes your retirement savings.

5. When Can You Access Your Pension Savings?

Employees cannot withdraw pension savings before retirement, except in specific circumstances. The pension becomes accessible when the individual reaches the State Pension age (currently 66 years, but may increase in the future).

Options at retirement include:

A tax-free lump sum (usually 25% of the pension fund).

An annuity (regular pension payments).

An Approved Retirement Fund (ARF) to manage the savings flexibly.

Early Withdrawal Exceptions:

Serious illness or permanent disability.

Death (pension funds are passed to beneficiaries).

Employees who emigrate cannot withdraw their pension early but may be able to transfer it to another pension system in their new country.

6. What Happens If You Change Jobs?

Pension contributions stay in your account, even if you leave your employer.

If you switch jobs, your new employer will start contributing to your pension.

Your pension fund will continue growing over time regardless of job changes.

Unlike traditional occupational pensions, Auto Enrolment follows the employee, not the employer.

7. What If You Already Have a Pension?

If an employer already offers a private pension scheme that meets minimum contribution standards, they may not need to enroll employees in AEPS. Employees should check whether their company's pension scheme is better or worse than the AEPS system.

If you already contribute to a PRSA (Personal Retirement Savings Account) or an occupational pension, the AEPS may not apply to you.

8. Why Is Auto Enrolment Being Introduced?

Ireland is one of the few developed countries without a mandatory pension system outside the State Pension. Currently:

1 in 3 private-sector workers have no pension savings.

The State Pension alone is not enough for most people to retire comfortably.

Auto Enrolment aims to increase pension coverage and reduce future dependency on the State.

By introducing AEPS, the Irish government ensures that more workers will have retirement savings beyond just the State Pension.

9. How Does This Compare to Other Countries?

Ireland's Auto Enrolment system is similar to pension schemes in:

UK (Workplace Pension Scheme) - Employers and employees contribute, with government incentives.

Australia (Superannuation Scheme) - A mandatory pension system with employer contributions.

New Zealand (KiwiSaver) - A voluntary but highly encouraged system.

Ireland's system is more generous than some other countries because of the government's top-up contribution (33%).

10. Final Thoughts: Should You Stay in the Scheme?

For most employees, staying enrolled is the best financial decision because:

You get free money from your employer and extra contributions from the government.

Pension savings grow over time, providing security in retirement.

Auto Enrolment ensures you don't rely solely on the State Pension, which may not be enough to maintain your lifestyle.

What You Should Do Now:

Check if you meet the eligibility criteria.

Understand how much you will contribute and how much free money you will get.

Decide whether you want to stay in the scheme or opt out (but remember, you'll be re-enrolled every two years).

The Auto Enrolment Pension Scheme (AEPS) 2025 is designed to help workers build long-term financial security. If you stay in the system, you are investing in your future with contributions from your employer and the government.

Will you stay enrolled or opt out? The choice is yours, but staying in means securing a better retirement!