From 1 January 2026, Ireland will begin a fundamental shift in the landscape of workplace pensions through a mandatory auto-enrolment (AE) regime (sometimes called My Future Fund) under the Automatic Enrolment Retirement Savings System Act 2024.
For business owners, the message is clear: this is not simply a regulatory compliance issue, it’s a strategic investment decision that will affect your payroll cost, your talent proposition, your budgeting, and your long-term competitiveness. Ignore it at your peril.
Below I break down:
- What the new regime entails (key features and timing)
- The direct impact on your cost base and the bottom line
- Strategic planning imperatives (budgeting, benefit design, employee communication)
- A roadmap you can follow through 2025 into 2026
What the auto-enrolment regime looks like
Key features & timeline
- The AE regime will be operated by a new state body, NAERSA (National Automatic Enrolment Retirement Savings Authority), which was formally established in 2025.
- Under secondary legislation, employer obligations are expected to take effect around September 2025, but first contributions are scheduled to begin 1 January 2026.
- The regime will target employees aged 23 to 60 earning €20,000 or more annually (and not already enrolled in an occupational scheme or pension via payroll)
- Contributions will be phased in over 10 years. For the first three years, both employee and employer will each contribute 1.5 % of gross salary, with a State “top-up” of 0.5 %. Eventually (year 10 onward) the rate will reach 6 % (employer), 6 % (employee), 2 % (State) on earnings up to €80,000.
- Employees will have an opt-out after six months (refund of their contributions), but employer and State contributions remain in the fund. They will be re-enrolled automatically every two years if still eligible.
- Employers who already operate pension plans may use them to satisfy the AE obligations but they must ensure the plan meets certain standards and that employees opt in.
In short: if you have eligible employees not currently in some pension scheme, from 2026 onwards you will be required to match contributions and manage associated administration.
Impact on your bottom line & cost structure
This new regime will introduce a clear and ongoing cost burden for employers. But the impact is also more nuanced than just “pension costs increase.” Here are the levers and implications to watch:
Direct additional cost
- In early years, your incremental employer contribution is modest (1.5 %), but over time it rises. As employee contributions increase, so will yours.
- On a salary of €40,000, for example, the employer contribution in years 1–3 will be €600 annually; by full maturity that becomes €2,400 (6 %) on €40,000. (Assuming no change to the €80,000 cap.)
- These contributions are likely deductible for corporate tax purposes under the AE regime.
- However, contributions under AE do not benefit from individual income tax relief (unlike conventional pension contributions). The State top-up replaces tax relief to some extent.
- The cap at €80,000 means contributions above that will not apply.
Administrative & compliance costs
- You will need payroll systems, processes, and reporting mechanisms to identify eligible employees, deduct contributions, transmit funds and reconcile with NAERSA.
- Many smaller firms may need to upgrade payroll systems or outsource the compliance burden.
- You will also need to handle communications, opt-out windows, re-enrolment cycles, suspension of contributions, etc.
Behavioral & HR costs
- Some employees may view the deduction as a reduction to take-home salary. That could generate pushback or morale issues.
- If your industry competes for lower-paid talent, this extra cost may influence how you structure pay or benefits.
- You may need to enhance your benefit proposition to maintain attractiveness compared to competitors not subject to these costs (e.g. companies outside Ireland or sectors exempt).
Offsetting & strategic levers
- Because your contributions are incremental, you can anticipate and phase them into your cost base rather than absorbing a sudden shock.
- You might adjust compensation structures slightly over time to accommodate the cost (e.g. slowing wage growth to reallocate budget for pension contributions).
- In sectors with high turnover, you might recoup part of the cost in retention benefits, a more generous pension benefit may serve as a differentiator.
- For employees already in existing pension schemes, you may be able to “grandfather” them (i.e. your current scheme could satisfy the AE requirement) — reducing the new load.
- Because the State contributes a top-up, the net burden is softened slightly.
But the bottom line: this is not trivial. Over time, pension costs could become a material fixed cost in many firms’ P&L.
Strategic planning & budgeting in 2025
To absorb this mandate with minimal disruption, companies need to treat it as a strategic shift, not just compliance. Here’s a forward-looking roadmap to embed into your 2026 strategy and budget process.
1. Conduct a “Pension Readiness Audit”
Start now:
- Identify which of your employees meet the age and salary thresholds, and which are already in a qualifying pension plan.
- Determine gaps, employees who must be enrolled under the new scheme but are not now.
- Assess your current payroll, HR, and benefits systems: can they support auto-enrolment, deductions, reconciling, reporting and exemptions?
- Calculate the incremental cost (year 1, year 5, year 10) under different salary growth scenarios.
- Evaluate whether your existing pension scheme(s) can be adapted or used to meet the AE requirement (and get employee consent).
2. Factor costs into 2026 budgeting
- Build phased-in cost assumptions: for example, 2026 employer contributions at 1.5 %, 2027–2029 ramping up, etc.
- Model different scenarios: wage inflation, changes in staff mix, growth.
- Incorporate administrative, compliance, and communications costs as line items.
- Evaluate whether to build a “pension transition reserve” over the 2025 base year to absorb startup inefficiencies.
3. Decide on your pension strategy
You essentially have two pathways:
a) Use the default AE scheme (My Future Fund) for all eligible employees
- Simpler from a compliance perspective
- Less control over fund choices, investment flexibility, and messaging
- Might be disadvantageous for higher-earning employees who prefer tax relief regimes
b) Employ your own pension/PRSA/occupational scheme to satisfy AE obligations
- Gives you more control, potentially better tax efficiency
- Must ensure the scheme is “qualifying” under AE rules and employees opt in
- You retain the ability to differentiate benefits or match rival firms
If you choose (b), you’ll need a structured employee engagement campaign and legal review of scheme design.
4. Invest in payroll & benefits infrastructure
- Engage your payroll provider now and stress-test for AE compliance features (deductions, opt-out windows, re-enrolment).
- Evaluate whether you need third-party support or consultancies for transition.
- Integrate AE compliance workflows (notifications, reconciliation, audits) into HR.
5. Communicate & engage proactively with employees
- Educate your workforce early: help people understand the value and how contributions work.
- Position the new scheme as part of your total rewards proposition, not just a cost burden.
- Use FAQs, webinars, and internal comms to mitigate pushback.
- Make it clear how their existing pension benefits integrate (or not) with AE.
6. Monitor legislative & regulatory changes
- Because AE is new, expect refinements, guidance and secondary legislation adjustments.
- Monitor announcements from NAERSA, the Department of Social Protection and the Pensions Authority.
- Be ready to adapt if starting dates, contribution rates, or compliance rules shift.
Why this matters strategically — Beyond compliance
- Talent & retention: In a tight labour market, employers that offer a more compelling retirement benefit will be more attractive.
- Cost discipline & forecasting: Viewing pension contributions as a structural cost, not an afterthought, leads to better financial control.
- Employee trust & engagement: A smooth rollout builds trust; a messy one can hurt morale and reputational capital.
- Risk mitigation: Non-compliance will invite penalties and regulatory scrutiny, better to be early and proactive.
- Long-term return: Investing in employee retirement well-being can pay dividends in reduced turnover, stronger loyalty and culture.
Conclusion & next steps
The shift to auto-enrolment pensions is no longer hypothetical, it’s real, coming 1 January 2026, and it will scale in cost over time. For business owners, this is not a side issue; it’s a fundamental change to your compensation architecture and cost base.
What to do next (in 2025):
- Conduct your audit — who is affected, what your systems need
- Model costs — staggered over time
- Decide your pension strategy (use AE default vs own scheme)
- Upgrade systems and processes
- Plan employee engagement and communications
- Keep watching evolving rules
