Making Sense of Auto-Enrolment: Who Wins and Who Might Lose

05 Jun, 2024
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Making Sense of Auto-Enrolment: Who Wins and Who Might Lose

When it comes to saving for retirement through auto-enrolment, some people may benefit more than others.  

Winners: Starting Early and Saving Smart 

If you’re just starting your career, auto-enrolment is a great chance to save for the future. Putting money aside for retirement early on means it has more time to grow. Even small amounts can turn into a tidy sum over time. So, if you’re earning less, you stand to gain the most from this as auto-enrolment offers a great opportunity to start building towards a secure financial future. 

Potential Losers: Employers and Higher Earners 

For employers, auto-enrolment means extra costs. They have to contribute to their employees’ pensions, on top of other expenses like wages and bills. 

If you are a high-income earner, you might lose out on tax perks. Normally, when you put money into a pension, the government gives you a bit back in tax relief. But with auto-enrolment, you miss out on these savings as your employer or the Government won’t match any of your contributions on any income over €80,000. So, higher earners could end up with less money in their pockets compared to traditional pension plans. 

And, if you are someone hoping to retire early, then auto-enrolment may not be the best option for you. Auto-enrolment restricts access to pensions until normal retirement age, unlike an occupational pension scheme that allows early access after leaving work.

What Can Be Done: Taking Control of Your Finances 

To tackle these challenges, there are smart moves you can make. Employers might set up special pension plans that offer more choices for their staff. And higher earners could explore other pension options that still give them tax benefits. 

By teaming up with financial advisors, everyone can find the best path forward. They can help craft personalised plans that make the most of auto-enrolment while keeping everyone’s financial goals in check.  

Planning Ahead for a Brighter Future 

Auto-enrolment brings changes, but with a bit of planning, everyone can come out on top. Starting early, making smart choices, and seeking expert advice can make all the difference in securing a comfortable retirement. So, whether you’re just starting out or further along in your career, taking steps now to secure your financial future is a wise move. 

 

Have a chat with our experienced financial advisors for personalised recommendations based on your personal circumstance

Source: gov.ie

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