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What is the new auto-enrolment pension scheme?

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‘Bedrock’: Regina Doherty said there are no plans to get rid of the State pension. Photo: Steve Humphreys

‘Bedrock’: Regina Doherty said there are no plans to get rid of the State pension. Photo: Steve Humphreys

‘Bedrock’: Regina Doherty said there are no plans to get rid of the State pension. Photo: Steve Humphreys

Do I have to join this pension scheme?

If you don't have a workplace pension already, the answer is yes. If you do, no.

 

What if I don't want to?

You will be automatically signed up for six months but can get out of it after that.

Your contributions will be refunded.

 

How many workers will benefit from it?

The minister said 585,000 workers will be eligible under the criteria for the scheme announced yesterday.

They are workers aged between 23 and 60 earning more than €20,000. Younger, older and lower paid workers can 'opt in'.

 

Why isn't the State pension enough?

Let's face it, €12,000 a year is not a lot to live on and the Government hasn't acted on its promise to increase the State pension in line with wages or inflation.

The burden on the State is only going to get worse.

Two-thirds of private sector workers don't have a workplace pension.

And the number of over-65s is set to double in the coming years.

 

Will I have to pay more PRSI to fund this scheme?

No, but you will be making a contribution worth 1.5pc of your wages. This will rise to 6pc after 10 years.

The good news is that your employer will match this on pay up to €75,000. The Government has not revealed what it will pay.

However, there are fears that PRSI may rise in the coming years due to the growing cost of the State pension system.

 

Will the Government scrap the State pension?

No. The pension from this scheme is being seen as a top up to the State pension.

Employment Affairs and Social Protection Minister Regina Doherty insisted yesterday there are no plans to get rid of the State pension. She described it as a "bedrock" of the system.

 

What will I get out of it?

It's unpredictable. It will be a defined contribution scheme, so workers bear the risk.

Pension experts have warned that the returns could be low.

The Society of Actuaries said there is a risk that those who don't specify the investment they want may go into a default fund with little or no growth.

 

When does the new scheme start?

It's due to start in 2022. But let's not forget that this auto enrolment scheme has been promised for years, so who knows?

Irish Independent