New pension scheme unveiled for thousands facing poverty in retirement
- New plan to be in place by 2022
- Scheme aimed at low to middle-income earners who do not have private pensions
- Private sector workers earning more than €20,000 a year will be automatically enrolled
- Workers earning less than €20,000 will not be automatically enrolled but can opt in
The Government has promised that hundreds of thousands of workers who are at risk of poverty will have a new pension plan in place by 2022.
Details on how the much-delayed auto-enrolment scheme might work were outlined by Social Protection Minister Regina Doherty, who promised there will be no more delays in delivering the new retirement scheme.
The State has been considering a pension plan for low and middle-income earners for 21 years now.
It was to be introduced in two years’ time, but Ms Doherty has promised it will be in place in four years’ time.
Less than half of all workers have an occupational or private pension to supplement their State pension.
Almost all public sector workers have an occupational pension.
However, just one third of workers in the private sector have a personal pension. This amounts to around 900,000 workers.
The Government fears that many of these workers will face poverty in retirement. The State has promised to keep pensions at a third of the level of the average wage, which is likely to leave many with a massive reduction in living standards when they retire.
The latest proposal on the new auto-enrolment scheme sets out how such a scheme might work. The public has been invited to respond to what is being called a “strawman proposal” setting out the mechanics of how the new scheme would work.
Auto-enrolment will be introduced on a phased basis from 2022 and is aimed at low to middle-income earners who do not have private pensions. It would apply to 410,000 workers.
Private sector workers earning more than €20,000 a year will be automatically enrolled in the new scheme, which will see the Government contribute €1 for every €3 put into the pension by the member.
The contribution level will be set at 1pc of wages from 2020, with employers being ordered to match to amount.
The contribution level will rise to 6pc per member by 2028.
Workers will not be able to opt out of the system for at least nine months after being signed up.
Employees earning more than €75,000 can continue to contribute to the scheme but their employer will not have to match contributions above that amount.
Workers earning less than €20,000 will not be automatically enrolled in the scheme but will be able to opt in to the system.
The self-employed will not be automatically signed into the scheme, but will have the option to sign in.