Below is the reply that the Association has received in response to queries that we have raised regarding the Auto Enrolment Pension. We will continue to keep members updated on this matter.
As Minister Humphreys announced in the Design Principles for the system, employees will have two opt-out options plus a savings suspension facility as follows:
- Employees may opt out six months after enrolment, within months 7 and 8. The employee’s contributions will be refunded to them, but the employer and State contributions will be retained in the employee’s pot.
- Employees may opt out six months after a contribution rate change, within months 7 and 8. The difference between the original and the new rate will be refunded to the employee, but all other contributions including the employee’s previous contributions, the employer’s, and the State’s, will be retained in the employee’s pot. This option will only be available in the first 10 years if the AE system.
- Employees may suspend their participation at any other time outside of the above defined periods but will not receive a refund of their contributions. Instead, all contributions made by the employee, employer and the State will be retained in the employee’s pot.
It is important to note that when an employee opts-out or suspends their contributions, employer and State contributions will also cease for that period. Where an employee opts-out or suspends their contributions, they will be automatically re-enrolled after two years.
Legal advice received by the Department indicates that employer contributions are considered the personal property of the employee, as they will form part of their remuneration package. The advice also indicates that as employees who opt-out are automatically re-enrolled, a longer-term view must be taken, and that therefore the employer’s contributions should remain in the employee’s pot. Based on this advice, the Department made the decision that it is appropriate for the employer and State contributions to remain in the employee’s pot in the event that the employee opts-out or suspends contributions.