Auto-Enrolment Pensions & MyFutureFund – The FIRST Month ….

In our earlier Blog, we took some time to outline ALL of the basic information available around the NEW auto-enrolment scheme, including why it exists, and how the MyFutureFund will operate etc.

Obviously the auto enrolment pension scheme is now LIVE, and Employers are experiencing how it is working in real time ! 

What has become apparent is that the launch of the auto enrolment scheme has NOT been without it challenges, with a number of ‘last minute’ changes made to some rules and processes that had been communicated to Employers and Employees for the last 6 to 12 months  . . ..

Some key questions have already been asked in the opening weeks of the scheme, including the following:

Q: How do we avoid auto enrolment for employees already making contributions to a personal pension scheme?

Q ; Are duplicate contributions made to MyFutureFund in the same month that personal pension scheme contributions are processed in the payroll?

Q : Why certain employees appear to be auto enrolled while others are not?

Q: Where do I find the new notifications for my employees i.e. within payroll software, the MyFutureFund portal (or both)?

Q: How do I process refunds to Employees who ‘opt out’?

Q: Are we now able to obtain refunds for Employers now as well?

Some of these are normal reactions in the first month of a large system change (which can be answered in the guidance provided to accountants and advisors), however some of them cannot be answered at all (as there is NO existing guidance) . . . . .

Where are we Now?

What is important is to ensure that you (as the Employer) have completed the initial steps that you NEED to do as part of the auto enrolment scheme i.e.

Have YOU ?

✔️REGISTERED –  on the My Future Fund Employer Portal

✔️AGREED –  to the terms and conditions

✔️SETUP –  a payment method, typically direct debit

✔️ADDED –  a named contact person

Remember the registration with the MyFutureFund Employer Portal enables 

✅ auto enrolment notifications to be issued from NAERSA

✅ confirms the communication contact for any issues that might arise

✅sets up payment methods for regular payment of pension contributions, and of course 

✅maintains compliance records.

❌Employers must NOT encourage, pressure, or incentivise employees to ‘opt out’ or suspend participation e.g. however the operation of the scheme must be communicated to all employees

❌You cannot influence the decision of the employees to participate in and more importantly remain within the auto enrolment scheme

As part of the launch, employee and employer contributions both begin at 1.5%, with an additional 0.5% from the State – and these amounts will increase incrementally over the next 10 years  . . .

Are there initial Learnings?

• The main positive is that the MyFutureFund establishes a minimum baseline for retirement saving for ALL relevant employees !

• However the MyFutureFund scheme is completely inflexible and can accept ONLY the basic State mandated contributions e,g. an Employer or Employee cannot agree to pay in any more than the 1.5% 

• For employees who are already contributing into a personal pension scheme, and who do NOT want to be auto enrolled into the (restrictive) MyFutureFund, there are fairly substantial administrative steps that need to be completed with their own pension scheme – in order to the deductions into their Employers payroll AND ensure that contributions can be paid each month by the Employer.

• For Employers, who haven’t set up their own Company Pension scheme, there is some administration falling on them to bring their employee’s individual pension schemes into their payroll – NOT to mention the variety of direct debits that will now come out of their accounts to New Ireland Assurance, Zurich, Bank of Ireland etc 

• For higher rate taxpayers, traditional company pension arrangements are usually more tax efficient due to higher-rate tax relief – which isn’t offered via the MyFutureFund scheme i.e. just the State contribuition of 0.5% !

• Changes have and are likely to continue to be made in response to practical issues that weren’t within (or expected) as part of the pre launch guidance e.g. the change pre Christmas to stymie Employers trying to ‘game’ the system with 1c pension contributions, no current process to action employee or employee contribution refunds etc 

Final Thoughts

Although the auto enrolment pension scheme has successfully launched across Ireland, it hasn’t been without its’ problems, whether system failures, ‘last minute’ changes and current lack of clear guidance on specific practical matters, however by and large the first month has been broadly a success ! 

Keep tuned for more information on the auto enrolment scheme over the coming months . . . .

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