Auto-enrolment and the changing shape of pensions in Ireland

Ireland’s pension system is changing as auto-enrolment begins. Michael Marshall examines what this means for savers, employers and the future of retirement planning

Ireland’s pension landscape has changed again.

Recent reforms have already raised the bar on governance and oversight, particularly through the Institution for Occupational Retirement Provision Directive (IORP) II.

An EU directive that requires stronger controls, clearer reporting and higher standards for trustees, the introduction of IORP II has driven the increased popularity of Master Trusts.

Auto-enrolment, long promised and now arrived in 2026, is the next major shift. It brings many new retirement savers into the system, but also introduces new pressures as it rolls out.

My Future Fund basics

Auto-enrolment could introduce an estimated 800,000 new savers into retirement provision. It will engage new investors in “My Future Fund” and may expand the market for savings and pension investments through traditional offerings with life insurers.

The contributory state pension, roughly €15,000 annually with full PRSI, likely won’t ensure a comfortable retirement for most, particularly given rising living costs. Therefore, helping people increase their retirement funding through auto-enrolment is welcome.

A key incentive for contributing to pensions is tax relief. Under My Future Fund, for every €3 contributed by an individual, their employer contributes €3, and the government contributes €1. This is equivalent to 25 percent tax relief for the individual.

This rate is great if you are earning under €40,000, compared to a private pension, which only offers 20 percent tax relief.

However, for those earning more than €40,000, this means that you are receiving less tax relief than the 40 percent available through the private pension provision.

This difference in relative tax relief may be partially mitigated by the employer contribution. However, the required “meaningful contributions” under occupational pensions are an evolving topic.

Education, advice and investment decisions

The rollout presents an opportunity for life insurers to demonstrate the benefits of existing retirement funding solutions.

Additionally, it presents an opening for financial advisors who are well placed to advise individuals and employers on pension provision. This can include items such as the relative benefits of My Future Fund versus private pension provision.

This need for advice also extends to investment strategy.

Auto-enrolment does not remove the need for workers to understand investment risk. Factors such as investment risk, time to retirement and lifestyle strategies all play a part.

An unsuitable investment choice can significantly impact retirement income. Therefore, choosing the right investment approach requires time, advice and careful planning.

Potential challenges arising

Like any new system, auto-enrolment will require time for people to become fully familiar with its workings.

This includes administrative needs for employers, payroll amendments and increased costs. Employer contributions start at 1.5 percent in year one and rise to 6 percent over the next 10 years.

Additional challenges may ensue when some employees who are far from retirement view it as an unnecessary “pay cut”.

This may lead certain groups to avail of the option to opt out, which could undermine the aims of the scheme—another reason why financial education and advice is so important.

Adequacy of retirement fund

It is important that the presence of an auto-enrolment system is not viewed as a guarantee of a comfortable retirement. Consideration of individual circumstances is required to ensure adequate retirement funding. Financial advice is critical in this respect.

The choice of how to take benefits (e.g., approved retirement fund versus annuity) is one of the most significant decisions for retirees. It is important to achieve a scalable, reliable solution to ensure advice is available at this point.

Lessons from other countries

Other countries have already travelled the auto-enrolment path, and their experience gives Ireland a sense of what to expect.

When the UK introduced auto-enrolment, participation rose sharply and saving for retirement became a normal part of working life. Ireland is likely to see a similar pattern as people get used to regular contributions and long-term saving.

To keep things simple, Ireland plans to operate the system with a single lifetime pot for each member. Workers will not have to manage several small pension accounts from different employers, a common frustration in other countries. One pot makes it easier for people to see what they have saved at any point in time.

However, simplicity brings trade-offs. Having multiple pension pots gives people the flexibility to retire different savings at different times. My Future Fund’s single-pot structure removes that option.

This could open space in the market for providers to develop products that help workers manage the timing of their retirement income in other ways.

The potential challenge at retirement is evidenced in other systems where there may be no clear path for people to withdraw their savings. Ireland will need to avoid this. Clear pathways and access to advice will be essential; poor decisions at retirement can have long-term consequences.

What happens next

Auto-enrolment will bring more workers into retirement saving and strengthen the overall system. It will also introduce new costs for employers and new decisions for employees. It raises the floor, not the ceiling. Workers will still need guidance and many will still need supplementary provision.

How well the system delivers will depend on clear communication, practical employer preparation and accessible advice. The offers opportunities for the Government, life insurers, and financial advisors to educate and further develop the retirement landscape.

Michael Marshall is a director in the Actuarial & Insurance Risk team in Grant Thornton