Ireland’s Auto-Enrolment Pension – What Canadian Businesses Need to Know

11 March 2025

If your Canadian business operates in Ireland or employs Irish workers, there are a few things you need to know.

Ireland is set to introduce a new Auto-Enrolment (AE) pension system, scheduled to launch on September 30th 2025. This long-anticipated reform aims to enhance retirement savings for private-sector workers who do not currently have access to an occupational pension. While there are still some unanswered questions, understanding the framework of AE and staying ahead of legislative changes is crucial for compliance and financial planning.

Under the new system, employees aged 23-60 earning over €20,000 annually will be automatically enrolled in the new Government workplace pension scheme called My Future Fund. The goal is to increase pension coverage and ensure long-term financial security for workers. Contributions will be made by employees, employers, and the government, increasing gradually over time. In the first three years, employees will contribute 1.5% of gross taxable earnings to a maximum of €80,000 per annum, matched by employers, with an additional 0.5% from the government. Contributions will rise every three years, eventually reaching 6% from employees and employers, with a 2% government contribution after ten years. Unlike traditional pension schemes, employees cannot opt out immediately. AE requires employees to remain in the system for at least six months before they can opt out.  Even if they choose to leave, they will be re-enrolled every two years, ensuring continuous pension savings.

Businesses with employees in Ireland will have legal, financial, and administrative responsibilities under this new change. Employers must enrol all eligible employees and ensure compliance with pension deductions, as fines and penalties could apply for non-compliance. Additionally, employers contributions will start at 1.5% of gross taxable earnings subject to a maximum of €80,000 per annum and gradually rise to 6% by year 10, impacting budgeting and long-term financial commitments. This means that payroll systems will need updating to handle automatic deductions, and businesses must clearly communicate pension options to employees.

So, you may be wondering how this specifically impacts Canadian businesses. As many Canadian companies operate in Ireland or employ Irish nationals, it is important to understand how AE interacts with other pension systems and the pension solution you may currently operate. For example, if a Canadian company employs workers on an Irish payroll, it must comply with AE regulations, including enrolment and contributions, unless all of your employees are members of the pension solution you currently operate. Expats working in Ireland and earning above the threshold will be automatically enrolled unless they have an alternative qualifying pension plan. It is also important to note that AE differs from Canada’s Pension Plan/ Quebec Pension Plan (CPP/QPP), where contributions are deducted from all working individuals, regardless of employer-sponsored pension schemes.

In terms of opt-out and flexibility options for employees, although you cannot opt out immediately, you may do so after six months. If they do choose to opt out, employee contributions will be refunded. However, employees will be automatically re-enrolled every two years, promoting long-term pension savings. With this in mind, employers are encouraged to support their workforce by providing clear information on pension benefits and the importance of financial planning. 

While the Irish government has outlined the framework for AE, specific incentives for employers are still being finalised. These possible supports include tax reliefs to offset employer costs, subsidies to assist with administrative expenses, and guidance and integration supports for businesses transitioning to AE.

This raises an important question: how should Canadian businesses prepare for the upcoming changes? The first step is to evaluate your current pension solution as to whether it could be used as a more advantageous solution than AE. Secondly, it is important to ensure that you can handle automatic pension contributions by assessing payroll and compliance systems. Budgeting for additional costs is also essential, as employer contributions will rise over time. Lastly, educating employees about the benefits of AE pension planning while also monitoring any legislative updates for potential employee incentives will be key in ensuring your business is fully prepared for the commencement of AE.

As September 2025 approaches and AE rolls out, staying informed and proactive will help Canadian businesses navigate Ireland’s new AE system smoothly.