IS AUTO ENROLMENT THE ONLY OPTION?

Auto Enrolment Arriving January 2026: What It Means for Employees — and Its Limitations

Ireland’s new Auto Enrolment (AE) system is scheduled to launch in January 2026, marking one of the most significant changes to the pension landscape in decades. For the first time, employees who are not already in a pension scheme will be automatically enrolled into a retirement savings plan, with contributions coming from the employee, their employer and the State. The scheme will initially apply to any employee in the state earning over €20,000 and between the ages of 23 and 60.

This is an important step forward for long-term financial security and will help thousands of workers begin saving for retirement. But AE is not a perfect solution and many employees and employers are already asking how it compares to a traditional employer-sponsored pension scheme.

Below, we outline the key limitations of Auto Enrolment for employees, as well as why a company pension scheme remains a more flexible and valuable option.

Currently, anyone making any sort of pension contribution through payroll is exempt from the State sponsored scheme.

Limitations of Auto Enrolment for Employees

1. Reduced Tax Relief for top rate taxpayers

A significant number of employees in Ireland either currently earn over €44,000 or have the potential to earn above that in annual income. This means that they will fall into the 40% tax bracket.

AE offers a government top-up but no direct tax relief. The top-up is the equivalent to approximately 25% tax relief though and this is standard across all employees.

A 40% tax payer would therefore be much better off contributing to an AE alternative.

2. Limited Investment Options

AE will offer a small number of standardised investment funds, including a default “lifestyle” fund.

Employees will not have the same flexibility as they would in a typical occupational pension scheme if they want:

• Ethical or ESG funds

• Higher-risk or lower-risk options

• Specialist sector funds

• Personalised investment strategies

3. Lower Maximum Contributions

Auto Enrolment has fixed contribution levels, gradually increasing over a decade. Employees who wish to contribute more than the AE minimums won’t be able to do so within the AE system itself.

Meanwhile, employer pension schemes allow much higher employee and employer contributions, supporting more substantial long-term savings — especially for older employees catching up on retirement planning.

4. No Option for Employer to Contribute More Than the Fixed AE Rate

In AE, employer contributions are set at a fixed percentage. Employers who want to offer enhanced benefits or use pensions as part of an employee-attraction strategy will be restricted.

An employer-sponsored scheme allows:

• Higher employer contributions

• Matching structures

• Tailored benefits for different employee groups

5. Lack of Flexibility on Access and Drawdown Options

Traditional pension schemes offer a range of retirement products, including:

• ARFs (Approved Retirement Funds)

• Annuities

• Vested PRSAs

• Flexible lump sum options

Auto Enrolment is expected to have a more restricted set of drawdown options, which may limit choice at retirement and impact how employees manage income in later life.

6. Limited Portability and Integration

AE is designed as a standalone system. Employees already contributing to other pensions will find that the AE pension cannot receive transfers from other pensions and currently has no interaction capability with existing pension structures.

7. No Personalised Financial Advice Included

AE emphasises simplicity and automation, but this also means:

• NO one-to-one retirement planning

• NO tailored investment advice

• NO guidance on tax efficiency

• NO personalised projections or planning tools beyond basic information

  
  

Employees in employer pension schemes often benefit from adviser support, workplace workshops and customised retirement planning.

8. One Size Fits All Approach

Employees have different needs depending on age, income, goals and career stage. AE is a uniform system with:

• Standardised contributions

• Limited flexibility

• Fixed rules around opting in/out

• No tailoring for high earners or older employees needing accelerated savings

Employer Pension Schemes Remain the More Flexible, Valuable Option

While Auto Enrolment will help ensure more workers are saving for retirement, it cannot replace the flexibility, control and long-term value of a well-designed employer pension scheme. Businesses that want to offer competitive benefits, support employee retention and maximise tax efficiencies will continue to rely on employer-sponsored schemes.

Need Guidance? We Can Help

From January, every person who fits the criteria will have a company sponsored plan or will be auto enrolled.

If you are an employer who is keen to have more control over your pension options then it is important that you speak with us at Financial Equality Services.

We specialise in clear, expert and jargon free advice. We are happy to provide a free consultation and have already helped numerous employers and employees with preparations for 2026 and beyond.

Get in touch with us to discuss how to put the right retirement benefits in place for your employees.