About 760,000 workers across the State will feel the impact of Ireland’s new mandatory workplace pension scheme for the first time this week when they receive their pay packets.
A worker on the State’s average wage of around €52,200 will see about €15 a week deducted from their pay to fund the new pension, called My Future Fund. That amounts to about €783 a year from take-home pay.
The worker contribution will be boosted by a similar payment from their employer and, for a worker on average pay, €5 from the State – which contributes €1 for every €3 put in by the employee.
The deduction – 1.5 per cent of gross pay – will automatically be taken from every worker earning more than €20,000, aged between 23 and 60 and not already a member of a workplace pension scheme.
READ MORE
The €20,000 includes income from all employments. Employers and the State will be obliged to contribute to other workers outside these parameters if they choose to join the scheme voluntarily.
That 1.5 per cent will rise in steps over the next decade until 2035, after which contributions will be set at 6 per cent of gross pay.
While workers will be entitled to opt out of the scheme in July or August, they have been advised against “knee-jerk” reactions that could see them lose out on benefits in retirement.
“For many of the 760,000 workers signed up to auto-enrolment (AE) this month, this could be the first time they have ever saved into a pension,” said Teresa Bruen, financial services spokeswoman for insurance broker, Gallagher.
[ Almost one in five people expect to be forced to work until age 70Opens in new window ]
She acknowledged that some low-paid workers may feel they simply cannot afford to pay into the scheme.
“However, for those workers, auto-enrolment could be their only opportunity to save into a pension scheme and to build up a pension pot for their retirement years, and indeed, it is for these workers that AE is likely to prove most valuable,” she said.
