The cost of employing people in Ireland will be rising in January 2026 with the introduction of the automatic pension enrolment scheme My Future Fund, a major reform in the pension landscape. If you are an employer, it’s time to start planning for these increased costs, which are going to be phased in over 10 years from 2026.

How will the pension savings scheme work?

The idea behind My Future Fund is that an employee, their employer, and the government all contribute into the employee’s pension fund (see the breakdowns in the table below). It is for those who are not already in a workplace pension plan; ensuring as many people as possible have some extra money when they retire instead of relying solely on the state pension. However, it will be possible to remain a participant in the auto-enrolment scheme and pay contributions to another pension scheme outside of the payroll system.

The scheme will be supervised by the Pensions Authority through a new public body called the National Automatic Enrolment Retirement Savings Authority (NAERSA). This administrator will be responsible for collecting contributions, distributing them to approved pension providers for investment, and then allocating returns to employee accounts. Investment will be in a balanced, diversified, low-risk default investment fund.

How much will employers pay in pension contributions?

The target employer contribution for this scheme is 6%, but this is being phased in and there are upper salary limits. There are believed to be around 750,000 employees in the country who fit the criteria for auto-enrolment. This is how the scheme will work:

• Auto-enrolment is for employees aged between 23 and 60 who earn between €20,000 and €80,000 gross but are not already enrolled in a supplementary pension scheme.
• During years 1 to 3, employers and employees will each contribute 1.5% of the salary. This will rise to 30% each in years 4 to 6, 4.5% each in years 7 to 9, and reach 6% each in year 10.
• For every €6 contributed by the employee and employer, the state contributes an additional €1. In other words, every €3 put aside by an employee becomes €7 in their pension pot.
• Contributions are fixed, and employers won’t be able to contribute less than the set rate.
• People earning less than €20,000 can choose to opt in, as long as they aren’t already on a supplementary scheme.
• The employer and state contributions are capped at €80,000 gross salary. However, an employee can choose to contribute on earnings over €80,000 if they wish.

This is what the breakdown of contributions annually will look like for an employee earning €40,000 a year:

	Employer/Employee %	Employee Contribution	Employer Contribution	State %	State Contribution	Annual Total
Years 1 to 3	1.5%	€600	€600	0.5%	€200	€1,400
Years 4 to 6	3%	€1,200	€1,200	1%	€400	€2,800
Years 7 to 9	4.5%	€1,800	€1,800	1.5%	€600	€4,200
Year 10 and beyond	6%	€2,400	€2,400	2%	€800	€5,600

Employees will be allowed to opt out of auto-enrolment under certain circumstances but will then be automatically re-enrolled after two years if they are still eligible. The government is no doubt relying on a degree of inertia and assuming that lots of people won’t get around to opting out and thus keep contributing.

Who manages the auto-enrolment pension?

As the employer, you will be responsible for calculating and paying contributions (through new functionality in your payroll software). All companies with employees in Ireland – regardless of their size or structure – must facilitate the auto-enrolment scheme for employees who meet the eligibility criteria and wish to opt in. An employee is any worker, director, or apprentice paid by an employer (typically PRSI class A) who is not self-employed (PRSI class S).

A new online portal will be created for employees to manage their enrolment and see their contributions balance. This will be based on a ‘pot-follows-the-member’ principle, meaning that an individual will have just one auto-enrolment pension pot across their working lives, regardless of where they work. NAERSA will also be in charge of enforcing compliance with the scheme. Employers failing to meet auto-enrolment obligations will be subject to penalties and possibly to prosecution.

Why are more pension provisions needed in Ireland?

Ireland’s population is ageing. The number of people aged 65 and over will grow from one-fifth to more than one-third of the working population over the next 20 years. This is a problem because only around 35% of the private sector workforce participates in some form of supplementary pension provision. People who retire without a pension scheme will rely on the state pension, which for many people will not be adequate and will result in a drop in living standards.

Despite the serious tax savings available on pensions contributions, take-up of supplementary schemes is not nearly as high as the government’s goal of 70%. This is due to a combination of factors. For employers, managing a scheme is an added cost and responsibility, and many will opt not to have one. For individuals, they can be seen as confusing, unnecessary, or something to put on the long finger. There is also a significant gender gap in pension saving, in part because on average women work less over their lifetimes due to career gaps, but also because of other obstacles such as being more risk-averse when it comes to financial investments.

As life expectancy and the cost of living continue to rise, solutions are needed. That’s why the government is introducing automatic enrolment pensions; a long-term solution that is projected to generate around €21 billion in funds in its first 10 years, sustaining consumer demand and business revenues. No longer the sole concern of the state, pensions provision will become a ‘tripartite social contract’ between employers, employees, and the state.

Is auto-enrolment good news or bad news?

I think the introduction of an auto-enrolment scheme makes a lot of sense. It will go a long way to changing the culture here in Ireland and make us all better at saving and planning for our futures. However, it does increase the cost of employing people, and these costs are already very high in Ireland.

As long as calculating and paying the contributions is made as easy as current PAYE filing, the only real impact on businesses will be financial. It’s important to plan for this scheme now by adjusting your financial projections and having a strategy to mitigate the rise in salary costs. One bonus at least is that your employer contributions under this scheme will be deductible for corporation tax purposes.

You can learn more about the scheme on the government website. There is also an extensive FAQ and a series of short videos answering specific questions employers or employees may have.

If you have any queries regarding Auto-Enrolment and how to plan for its introduction please contact us.

We offer support with Business Planning and Coaching and we can assist you.