Last-minute Regulation to Protect My Future Fund from Employer Undermining
In a swift move to safeguard the new auto-enrolment pension scheme, Social Protection Minister Dara Calleary has signed a last-minute regulation. This regulation aims to prevent companies from attempting to bypass the My Future Fund by enrolling workers in less beneficial company pension schemes with minimal contributions.
The My Future Fund scheme, set to automatically enroll hundreds of thousands of workers from January 1st, mandates employers to contribute 3.5% of their salary to the fund. However, some employers have been trying to exploit loopholes by enrolling staff in company schemes with very low contributions, potentially undermining the scheme's effectiveness.
Minister Calleary's regulation sets clear minimum contribution requirements for occupational pension schemes. These standards ensure that any pension arrangements outside the My Future Fund provide at least the same level of benefits as the introductory contribution rates within the fund. For defined contribution schemes, the total contributions must amount to at least 3.5% of the employee's gross pay, with a maximum of €1,200.
The regulation also specifies that 1.5% of the contribution must be made by the employer to exempt an employment from enrolment in My Future Fund. For defined benefit schemes, the standards focus on long-term benefits based on continuing employment, allowing such employments to be exempted.
Minister Calleary emphasized the importance of not compromising well-established, well-designed pension schemes. However, he also stressed the need for these occupational schemes to serve their purpose in providing sufficient retirement savings for participants.
The Irish Congress of Trade Unions welcomed the prescribed standards, stating that the regulations will prevent employers from sidestepping auto-enrolment with low-cost solutions. Owen Reidy, the general secretary, highlighted the primary goal of auto-enrolment: ensuring workers have a more comfortable retirement with additional income beyond their state pension.
Since the start of the month, over 77,000 employers with approximately 645,000 employees have registered for My Future Fund. The government estimates that around 750,000 workers will be covered by the scheme. Anyone aged 23 to 60, earning over €20,000 annually, and not enrolled in a qualifying occupational pension scheme will be automatically enrolled in My Future Fund.
