From January 2026, Ireland’s workplace pension system will change with the introduction of auto-enrolment. This new system is designed to make saving for retirement automatic. Employees, employers, and the government will each contribute to a worker’s pension fund.
For many employers, this change brings new responsibilities and costs. Some are already exploring a different option — the Personal Retirement Savings Account (PRSA). Both options can help employees save for retirement, but they work in very different ways.
This guide breaks down how each one works and what the key differences mean for both employers and employees.
How Auto-Enrolment Works
If you’re between 23 and 60 years old, earn €20,000 or more a year, and don’t already have a pension, you’ll automatically be added to the new state pension scheme.
If you earn less than €20,000 or are outside the age range, you won’t be enrolled automatically, but you can still join if you want to.
Your contributions will be a fixed percentage of your salary. Your employer will match what you contribute, and the government will add an extra amount. Neither you nor your employer can pay more or less than the set rate. These contribution rates will increase gradually over time to help both sides adjust.
One key limitation is access. You can only take money from your auto-enrolment fund when you reach the state pension age, which is currently 66.
How Much Will You Pay?
Contributions under auto-enrolment are set at a fixed percentage of your annual salary. Your employer will match your payments, and the government will also contribute an extra amount. Unlike traditional pension schemes, you cannot contribute more or less than the set rate.
Below is the planned contribution schedule showing how rates will increase gradually over time.
Auto-Enrolment Contribution Rates
|
Year of the Auto-Enrolment Scheme |
Employee Contribution |
Employer Contribution |
Government Contribution |
|---|---|---|---|
|
Years 1–3 |
1.5 % |
1.5 % |
0.5 % |
|
Years 4–6 |
3 % |
3 % |
1 % |
|
Years 7–9 |
4.5 % |
4.5 % |
1.5 % |
|
Year 10 and after |
6 % |
6 % |
2 % |
This phased approach introduces the new system gradually so both employees and employers can adjust to the cost increases over time. However, it also has limitations, such as fixed contribution levels and benefits that remain tied to the state pension age, which is currently 66.
To see how this works in practice, here’s an example based on a worker earning €20,000 a year.
Example: Worker Earning €20,000
|
Year of the Auto-Enrolment Scheme |
Employee Pays |
Employer Pays |
Government Pays |
Total Annual Contribution |
|---|---|---|---|---|
|
Years 1–3 |
€300 |
€300 |
€100 |
€700 |
|
Years 4–6 |
€600 |
€600 |
€200 |
€1,400 |
|
Years 7–9 |
€900 |
€900 |
€300 |
€2,100 |
|
Year 10 and after |
€1,200 |
€1,200 |
€400 |
€2,800 |
Why Employers Might Look at PRSAs Instead
A PRSA works differently. It’s a personal retirement account that gives both employers and employees more control. Employers can set up a PRSA scheme that suits their workforce, and employees can tailor contributions and investments to fit their own goals.
Here’s what makes PRSAs attractive:
-
Flexibility in contributions. Employers can decide how much to contribute, and employees can choose their own contribution level.
-
Tax benefits. Employees earning over €44,000 can qualify for up to 40% tax relief on their contributions.
-
Earlier access to funds. You can draw from your PRSA at age 60, compared with 66 under auto-enrolment.
-
More investment choice. PRSAs offer a broader selection of investment funds. Auto-enrolment will have limited options, including one called My Future Fund.
-
Personal financial reviews. PRSAs often come with regular, individual financial reviews. Auto-enrolment will not include this kind of personalised support.
Comparing Auto-Enrolment and PRSAs
|
Feature |
PRSA |
Auto-Enrolment |
|---|---|---|
|
Tax Relief |
Up to 40% on salaries above €44,000 |
Equivalent to 25% through state contribution |
|
Fund Choice |
Broad range of investment funds |
One main fund (My Future Fund) |
|
Access to Funds |
From age 50 |
From age 66 |
|
Employer Contribution |
Fully flexible |
Fixed schedule from 1.5% to 6% over ten years |
|
Financial Reviews |
Personal and regular |
None |
|
Employee Contributions |
Flexible amount |
Fixed percentage, no extra payments allowed |
|
On Death |
Paid to estate tax-free |
Treated as a taxable benefit-in-kind |
Choosing Between Auto-Enrolment and PRSAs
The best option depends on what you value most.
If you want something straightforward and automatic, auto-enrolment might suit your business. It’s simple to set up and ensures every eligible employee is saving for retirement.
If you prefer flexibility, higher potential tax relief, and more control over contributions and investment choices, then a PRSA could be the better fit. It can also give employees more freedom and access to personalised financial advice.
However, whichever you choose, it’s important that your pension scheme meets Irish regulatory standards. For PRSAs, this includes compliance with:
-
The Irish Pension Regulations
-
The Consumer Protection Code
-
The Pensions Act
The Bottom Line
Both options aim to improve retirement savings in Ireland, but they do it in different ways. Auto-enrolment offers simplicity and consistency. PRSAs offer choice and flexibility.
The right decision depends on your business goals and your workforce’s needs. Reviewing your situation with a qualified financial advisor can help ensure you choose the plan that works best for both your company and your employees.
Need Help?
If you’re an employer looking to prepare for auto-enrolment or to create a PRSA scheme tailored to your team, Allied Financial can help you set it up and ensure compliance with all regulatory requirements.
