Auto-Enrolment Pensions – What Employers and Employees Need to Know Before 2026
- nicolamernagh0
- 4 days ago
- 3 min read
From January 2026, the pension system in Ireland will undergo one of the biggest overhauls in decades. The long awaited auto-enrolment scheme, My Future Fund, is set to launch, finally bringing Ireland closer to systems already in place in countries like the UK.
The idea is simple, make it easier for people to save for retirement. Employees who aren’t already in a pension scheme, will be automatically enrolled, with contributions coming from the employee, their employer, and the State.
For employees, it’s a straightforward way to start putting money aside for the future. For employers, it’s a significant change that will affect payroll, HR, and compliance processes. With just over a year to go, now is the time for both sides to understand what’s coming and begin preparing.
How Auto-Enrolment Will Work
Under the new system, Revenue will identify eligible employees, removing the need for manual checks. Once identified, notifications will be issued through payroll software, helping to make the process seamless.
From there, contributions will be deducted directly from the employee’s gross pay and matched by the employer. These combined payments will be invested on the employee’s behalf, steadily building a retirement pot without any extra effort from the individual.
Who Will Be Affected?
Auto-enrolment will apply to employees aged 23 to 60, earning over €20,000 a year, and not already in a qualifying scheme. They’ll be enrolled automatically.
Those outside this bracket, younger/older workers, or those earning less won’t be automatically enrolled but will still have the option to opt in.
There are a few important points to take note of:
Higher rate taxpayers (40%) may lose out under auto-enrolment compared with the tax relief available in traditional pension schemes.
Standard rate taxpayers (20%) may prefer the flexibility that existing workplace pensions already provide.
It’s not yet fully clear whether employees will be placed directly into the My Future Fund or through a Master Trust PRSA, something to watch as the launch date gets closer.
Contributions & Supports
The scheme is built on a shared contributions model, split between employees, employers, and the State.
Starting point: 1.5% of gross pay from both employee and employer.
Stepping up: Contributions will rise every three years until they reach 6% each by year ten.
Cap: Contributions will apply on earnings up to €80,000.
State top up: For every €3 put in by the employee and employer, the State will add €1.
This structure is designed to keep the cost manageable in the early years, while ensuring savings build steadily over time.
Opt Out & Suspension Rules
Although auto-enrolment is designed to be simple, employees will still have some flexibility.
Opt out: Between months seven and eight, employees can opt out and have their own contributions refunded. Employer and State contributions will remain invested.
Suspension: Employees can pause contributions for one to two years, with payments resuming once they rejoin.
Why Employees May Prefer Existing Workplace Schemes
Auto-enrolment is a positive step for those who currently have no pension coverage. But for many employees, an existing workplace scheme may still prove more attractive:
More generous tax relief: particularly for those on the higher 40% tax rate.
Room for larger contributions: AE contributions are capped at €80,000 earnings, while traditional schemes often go further.
Flexibility: workplace pensions typically offer more choice in investment funds and retirement planning.
For that reason, both employees and employers should carefully weigh up the options: stick with auto-enrolment, remain in a traditional scheme, or even take a combined approach.
The launch of auto-enrolment in January 2026 is a milestone for retirement savings in Ireland. For employees, it creates a simple, accessible way to build financial security. For employers, it introduces new responsibilities across payroll, HR, and compliance.
The best approach? Plan ahead. By reviewing existing arrangements now, understanding the new rules, and preparing in advance, both employers and employees can make sure they’re ready to get the most out of the system when it arrives.
How UHY Can Help
At UHY FDW, we know the impact this change will have on employers. From updating payroll systems to budgeting for contributions and guiding employees through their choices, there’s a lot to prepare for.
Our team can:
Review your workforce and identify who will be automatically enrolled.
Ensure your payroll systems are ready for the new contribution requirements.
Advise on cost planning to help manage the phased increase in employer contributions.
Support HR teams with updating contracts, policies, and employee communications.
Provide ongoing compliance reviews to keep your business aligned with legislation as it evolves.
To discuss how auto-enrolment will affect your business , and the steps you can take now, contact any member of our Payroll team at UHY FDW.
Source: gov.ie
Source: citizensinformation.ie
