- with Senior Company Executives and HR
As the launch of My Future Fund (MFF) approaches, the Department of Social Protection (the Department) has written to various pensions industry bodies including the Irish Association of Pension Funds (IAPF), the Irish Congress of Trade Unions and the Society of Actuaries in Ireland warning employers against illegally obliging employees to join company pension schemes that provide only nominal employer contributions.
The Department has cautioned that such practices may amount to hindering employees from accessing MFF, an offence under the Automatic Enrolment Retirement Savings System Act 2024 (the Act).
As a result of these concerns, the Department noted that NAERSA (the regulatory body responsible for MFF), in consultation with the Pensions Authority, is actively considering introducing minimum contribution rates for pension schemes to qualify as exempt from the Act in the "near course".
Minimum Pension Contribution Rates
The IAPF met with the Department this week to seek clarity on the issues raised in the Department's letter. In the IAPF's subsequent statement, it was confirmed that:
- The Department intends to implement regulations within the next couple of weeks, effective 1 January 2026.
- These regulations will introduce a minimum contribution rate of 3.5% of gross pay, with at least 1.5% paid by the employer. The remaining 2% may be paid by either the employer or the employee.
- Non-contributory schemes will not be impacted provided the employer contribution is at least 3.5% of gross pay.
This could have significant legal and budgetary implications for many employers who had been preparing for auto-enrolment based on the published legislation, which did not mandate minimum contribution levels from 1 January 2026 for exemption from MFF.
Employers who had intended to enrol all employees in their pension scheme as part of their MFF planning may need to amend their pension schemes to meet the minimum pension contribution standards. Substantial additional expenses may be incurred if these changes are brought in from 1 January 2026. Also, increasing employee contribution levels may pose potential legal challenges where employee consent to such increases has not been obtained.
It was previously understood that where any contribution was being paid via payroll, the employee would be in exempt employment for MFF purposes. Many employers may have flexible contribution rates whereby employees pay matching rates of 1% upwards. It now seems that those employees who are paying a matching contribution rate of 1% may not be considered in exempt employment once these regulations are introduced.
Various industry bodies are engaging with the Department on the proposed regulations. The Association of Pension Lawyers in Ireland has written to the Department this week outlining various concerns and suggested a 12 month lead-in time for the proposed regulations.
Next Steps
At the time of writing, the Department has not confirmed when these minimum contribution requirements will be introduced. It remains unclear if employers will be given a reasonable lead-in time to prepare for their introduction. Therefore, it is premature for employers to materially alter their MFF planning until a more definitive picture emerges regarding the proposed minimum contribution requirements.
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