Will workers have to join the AE scheme?

C

Colm Fagan

Registered User
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I've a question on AE which has nothing to do with my smoothed equity proposal.
I've been asked to participate in a conference call on AE this morning with experts from a number of other countries (some of which are considering my smoothed AE approach!!). In preparation for the call, I have had to study aspects of government's proposals other than investment strategy (my specialist subject!).
Am I right in understanding that workers who are not members of pension schemes will be forced to join AE for six months irrespective of whether or not they're interested in joining? That's my reading from the third bullet point of the following extract from this explanation of the scheme for employees.
  • auto-enrolment scheme is a semi-mandatory retirement savings system designed to give employees extra income in retirement
  • every €3 an employee contributes will be matched by their employer, and the state will top up with a further €1
  • employees who are enrolled will have to stay in the system for six months, but they will be free to opt out in months 7 and 8 if they so wish
  • in the first ten years, employees will also be able to opt out in months 7 and 8 after each contribution rate increase
  • employees will also be able to suspend or pause their contributions at any time outside of the mandatory six-month participation period
Looking at those bullet points again, though, one could read it that, the day an employee is enrolled, they can say (under the last bullet point) that they want to "pause or suspend their contributions", which effectively means that they don't have to join.
I'm confused! Can anyone enlighten me?
 
My understanding, subject to change:

If they Opt Out, they get their contributions returned to them. The Employer's and State's contributions are kept in the employees account. This sounds like there is no real opt out. It will cost the system more to manage and pay out a pension pot of a hundred or so euro on retirement.

If they pause, they don't get a repayment.
 
Thanks @S class and @Towger for your prompt replies. I can see this being a real mess, trying to force workers who have no interest whatsoever to pay pension contributions for six months.
 
Any employee (eg. co. director) that's at SFT limit and isn't paying into a pension scheme is going to be automatically enrolled.

I feel a revised SFT of €2.5M might be on the way.

They've given themselves 7 years to decide on the standards for exemptions and probably things like charges, funds, vesting etc. so it really is a waste of time speculating on what may or may not be be in the actual AE product that's brought to market. So many loose ends to be sorted out before that happens and they will tweak it as they go.


Gerard

www.prsa.ie
 
Towger said:
My understanding, subject to change:

If they Opt Out, they get their contributions returned to them. The Employer's and State's contributions are kept in the employees account. This sounds like there is no real opt out. It will cost the system more to manage and pay out a pension pot of a hundred or so euro on retirement.

If they pause, they don't get a repayment.
Click to expand...

Sorry if this is a stupid question, but just to be clear : if the employee opts out will the employer's and government's monthly contributions also immediately stop? (If so, isn't this an incentive for an employer to encourage their staff to opt out?)
 
Marsupial said:
Sorry if this is a stupid question, but just to be clear : if the employee opts out will the employer's and government's monthly contributions also immediately stop? (If so, isn't this an incentive for an employer to encourage their staff to opt out?)
Click to expand...
Yes, but that's the incentive for Employee's to stay in - they benefit from the Employer and Government contributions.
 
The hope is that even those who had no interest in joining AE, with the 6 months compulsory and effort required thereafter to leave, the vast majority will just leave it alone
 
TheJackal said:
The hope is that even those who had no interest in joining AE, with the 6 months compulsory and effort required thereafter to leave, the vast majority will just leave it alone
Click to expand...
That's the idea. The hope is that "inertia " kicks in and most will just become accustomed to the pension contributions (deductions).
 
Conan said:
Yes, but that's the incentive for Employee's to stay in - they benefit from the Employer and Government contributions.
Click to expand...

Cunning employer to gullible employee: "Well Joe, if you opt out then I'll increase your weekly pay by 2% and you'll also get back that 3% that AE is taking from your wages every week."

Who could turn down such an attractive offer! :)

EDIT: especially if they're a low wage worker from Eastern Europe who doesn't plan to remain in Ireland for too long.
 
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