Auto-Enrolment questions

D

dovetail

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Hello AAM,

I have some questions about Auto-Enrolment before it starts (I am trying to figure out the most favourable outcome to me based on my current employment situation: I am 46 years old. I work for a very small company and earning 70k pa. I am paying privately and directly to a Zurich PRSA by myself (not through my employer and no contributions from my employer). I max out the tax relief entitlement each year.

  • Based on my current situation, when the time comes, would I be better to opt out of auto-enrolment, and continue as I with my PRSA only?
  • Or could I maximise benefits by commencing auto-enrolment and also by continuing to pay into my PRSA going as it currently is?
  • If I commenced auto-enrolment and also keep paying into my PRSA, would my tax relief entitlement on the PRSA be reduced by the amount that the government will add to my auto-enrolment?
  • I decided to switch jobs in the future whereby I ended up in the 20% tax band, which system/product (AE or PRSA) would be more favourable in this case?
Thank you in advance for any advice or help with the information!
 
dovetail said:
Based on my current situation, when the time comes, would I be better to opt out of auto-enrolment, and continue as I with my PRSA only?
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You are missing your employer's top-up if you opt out. This is something you should discuss with your employer. I don't think your current arrangement exempts you from being auto-enrolled as your PRSA is not through payroll.

dovetail said:
Or could I maximise benefits by commencing auto-enrolment and also by continuing to pay into my PRSA going as it currently is?
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We can only guess at the answer to this one. It seems likely to begin with that you can have max tax relief with your PRSA and enjoy the 1 for 3 top-up with My Future Fund.
dovetail said:
If I commenced auto-enrolment and also keep paying into my PRSA, would my tax relief entitlement on the PRSA be reduced by the amount that the government will add to my auto-enrolment?
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As above.
dovetail said:
I decided to switch jobs in the future whereby I ended up in the 20% tax band, which system/product (AE or PRSA) would be more favourable in this case?
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Unquestionably you should be in MFF. Ex post investment returns will dominate but we cannot tell the future.
 
This is very helpful! Thank you Duke! I'll keep contributing to my PRSA and will contribute to the MFF as soon as its up and running to get the 1 for 3 top-up!
 
I suppose you can technically continue with your own PRSA arrangement (not thru payroll) with max tax relief AND avail of the top-ups with MFF.
There is no tax relief with MFF.
So you get best of both worlds.
Until the Govt sees this as a loop-hole and disallows it someday. :rolleyes:

Auto-enrolment: Your questions answered

Retirement savings scheme which people will be enrolled in once they meet certain requirements
www.gov.ie www.gov.ie

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Thank you Redstar! Good to know that I can get the best of both wolds as you say. And I can review again in the future if any revisions are made to AE.
 
AFAIK you cannot do both. My understanding of how it will work is the Revenue will,identity who,is,in receipt,of,tax relief via PAYE Mod. If none you will be auto enrolled. It will be an either or.
 
Fiver Spare said:
AFAIK you cannot do both. My understanding of how it will work is the Revenue will,identity who,is,in receipt,of,tax relief via PAYE Mod. If none you will be auto enrolled. It will be an either or.
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What's your source for this? I haven't seen this mentioned in any of the official documents issued on gov.ie. They only mention exclusion if you are paying into a pension via payroll as said above by @redstar
 

Does my existing scheme need to meet standards to be exempt from auto-enrolment?​


No, once there is a pension contribution paid through payroll from an employee or employer, the employee will be deemed as having pension coverage already and won’t be enrolled into My Future Fund for that employment.

However it is planned that by the end of year six of the operation of the new auto-enrolment pension scheme (at the latest) that standards for the exemption of existing pension schemes will be developed with the assistance of the Pensions Authority.

So, AE is going to be a work in progress for quiet some time ahead. I think that it would make little sense for a Goverment to say 'We want you all to have private pensions and then say 'Oh you can't be paying into that one as well as this really basic one as our only goal is coverage. To hell with how big you want the fund to be.'


[As an aside, AE has generated a huge amount of free advertising for those of us in the pension industry. I would say that intermediaries and providers have been very busy over the last 12 months with pension business and it's great that there are regulated/qualified providers/advisors available that can answer individual and company questions. As of now I'd say that AE has achived some of its goal or increasing coverage, albeit indirectly.

Not related to the title of the post but if a mod wants to open a separate post so that this one doesn't go wildly off course, by all means do that.]
 
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GSheehy said:
Does my existing scheme need to meet standards to be exempt from auto-enrolment?
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At the moment, once a non zero value is returned to Revenue by payroll the employee will not be AEed. NB: Employees on private pensions will be AEed. Revenue is not provided that data to DSP.

Stage 2 of AE will compare the Pension amounts being sent into Revenue vs how much an AE Pension would pay. If AE would contribute more the employee will be AEed as well, on rates to make up the difference.

This gets interesting because pensions were traditionally based only on Basic Pay. Pension AE is based on Revenue's definition of Gross Pay, which is all taxable/uscable pay + salary sacrifice.
 
Towger said:
Pension AE is based on Revenue's definition of Gross Pay, which is all taxable/uscable pay + salary sacrifice.
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Interesting. So for an employee with earnings that fluctuate every month (e.g. depending on how many shifts they work in a particular month, overtime, sales commissions), will the AE calculation and contribution vary each month? Easy enough to administer via a payroll system, just like another tax, but will take a fair degree of sophistication at the NAERSA end to make sure that the contributions are correctly invested each month.
 
Dave Vanian said:
fair degree of sophistication at the NAERSA end to make sure that the contributions are correctly invested each month.
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Yes, they will start at 1.5% for both Ee and Er of Revenue Gross Pay, each time an employee is paid. One issue is NAERSA will not allow corrections after the 'Pay Date'. While Revenue handle about 250k automated corrections each year, for just employees in to 20k to 80k range and no company pension. As AE is tied to Gross Pay the majority of payroll corrections will change the AE contribution amounts. DSP's solution to this is payroll corrections should be made in the next payroll run.
 
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