National Pensions Framework Summary

1. New Auto-Enrolment Scheme – to be introduced in 2014 – subject to economic conditions

• Employees (aged 22 or over) will be automatically enrolled once they enter employment or change employment unless they are a member of their employer’s scheme which must be:
– a DB scheme, or
– a DC scheme with a ‘ee contribution rate greater than or equal to the new scheme and an ‘er contribution rate greater than or equal to the new scheme
• Contributions to the new auto-enrolment scheme will be collected through the PRSI system via a central processing agency.
• Contributions to the new auto-enrolment scheme will be made within a band of earnings which has yet to be decided e.g. must be earning €350 per week and paying contributions on earnings up to €1,000 per week.
• Employees will be required to make a fixed percentage contribution of 4%. Contributions will qualify for PRSI and Health Levy relief.

• There will be matching State contribution of 2% and an employer contribution of 2%. The State contribution will equal 33% tax relief – the delivery mechanism for this has yet to be decided.
• A range of funds, including a low-risk default option, will be available. There will be no Government guarantees on investment returns.
• Employer contribution is mandatory.
• Employees can opt out but they will be re-enrolled every two years.
• Once an employee remains in the scheme for six months, their contribution will be held in a pension account and no withdrawals will be allowed.
• Once-off bonus payment for people who remain in the scheme for more than five years continuously.
• Intended that benefit withdrawals will be similar to PRSAs
• Small DC funds (probably €10,000 but exact figure yet to be agreed) may be transferred into the scheme – no matching contribution from the State or employer will be provided.

2. Current Pension Arrangements – implementation dates not agreed
• The State contribution will equal 33% tax relief – the delivery mechanism for this has yet to be decided. Tax relief on employer contributions and tax-free investment income to remain.
• Access to Approved Retirement Funds will be provided for defined contribution scheme members with effect from 2011.
• Specified income test to be increased from €12,700 to 1.5 times the State Pension (Contributory). AMRF option no longer to apply for new retirees. For existing retirees, the AMRF can become an ARF once the then specified income test is satisfied.
• Tax-free lump sum exceeding €200,000 to be taxed
• The range of personal pension vehicles available will be reviewed with a view to rationalising provision in this area.
• Regulations will be introduced to increase the transparency of pension charges;
• A revised and more secure defined benefit (DB) model is proposed which schemes may wish to consider if restructuring in the future.

3. Social Welfare Pensions
• Mandatory social welfare pension coverage will continue. The Government will seek to maintain the rate at 35% of average earnings.
• The system will be simplified with a move to a total contributions approach in 2020.
• Retirement age for State Pension age will increase to 66 in 2014 [(with the abolition of the State Pension (Transition)], 67 in 2021 and 68 in 2028.
• Arrangements will be put in place to allow people to postpone receipt of the State pension and to make up contribution shortfalls.

4. Public Service Pensions
• A single new pension scheme will be introduced for all new entrants, with effect from 2010.

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