A number of “very cruel” employers are trying to sign their staff up to cheap pension schemes that deprive them of the full benefits of auto-enrolment. 

From 1st January, workers aged between 23 and 60 who earn more than €20,000 a year have the right to be automatically enrolled in the My Future Fund pension scheme. 

In the first year, the staff member pays 1.5% of their salary into the fund and the employer contributes an equivalent sum. The State then tops it up with an amount equivalent to 0.5% of the employee’s salary. 

On Newstalk Breakfast, Irish Independent Personal Finance Editor Charlie Weston said some companies are exploiting a loophole in the legislation that allows them to avoid auto-enrolling their staff. 

“What employers are trying to do - some of them anyway - according to the Minister… is get around this by signing staff up to an in-house pension scheme, an inferior in-house pension scheme,” he explained.  

“It’ll have just contributions of 1% being made by the employer and nothing being made by the employee. 

“That’s about a third of what would be contributed under the new My Future Fund Autoenrollment scheme. 

“Basically, they’re token contributions, it’s just a way of avoiding the cost and administration.” 

An elderly pension. Picture by: Alamy.com.

An estimated 750,000 workers are expected to benefit from the new auto-enrolment rules and the Department of Social Protection is drafting a new statutory instrument that will ban firms from forcing staff to opt into inferior schemes. 

“Employers are quite free to sign up staff who are likely candidates for the My Future Fund, sign them into a proper company pension if they have one,” Mr Weston continued. 

“In some cases, employers are telling people, ‘The law says you have to come into this pension’ or forcing them to waive their right to a pension. 

“So, it’s a mess.” 

Minister for Social Protection Dara Calleary.

For any staff member who has been signed up to an inferior pension scheme, Mr Weston suggested that contact their trade union and the dedicated My Future Fund helpline. 

“Tell them what’s going on and the Government are going to bring in these regulations, which is going to hopefully stop this.” 

Mr Weston described auto-enrollment as most likely the biggest change to pensions in the “history of the State” with a likely transformative impact on people’s retirements. 

“It seems very cruel that they’re trying to do this,” he added.

Main image: An elderly pensioner holding a leather wallet with money in it. Picture by: Alamy.com.