Minimum standards
With auto enrolment, there was an exemption for PRSAs that were processed through payroll. This lead to a flurry of PRSAs being set up with the minimum €10 a month being paid. The government had to make a rush amendment to the legislation imposing minimum standards in order to qualify for an auto enrolment exemption. This applies to occupational pension schemes and PRSAs:
- Employer contributions of at least 1.5% of gross pay or €1,200 in any one year, whichever is lesser and
- Total contributions (employer and employee) of at least 3.5% of gross pay or €2,800 in any one year, whichever is lesser.
Failure to meet these minimums will result in the employee having to sign up to auto enrolment.
Non contributory pensions
It also clarifies the question I received from a number of clients where there were non contributory pensions. These were where the spouse was on payroll and paying A1 PRSI contributions. They were getting notifications when running payroll that they should be signed up for auto enrolment as they weren’t making any personal contributions, all contributions were company payments. This has confirmed that at long as over 3.5% of salary is going into a pension, there is no requirement to sign up to auto enrolment.
By Steven Barrett of Bluewater Financial Planning.
