Employers pension obligations

01 November 2016

Updated November 2016

This factsheet, written by the Pensions Authority, gives introductory guidance on the obligations which apply to employers under The Pensions Act (as amended). It covers the role of the Pensions Authority and describes the pension system in Ireland including the Standard PRSA, remittance of contributions, 'on the spot' fines and employers' obligations for trustee training.

The Pensions Authority (formerly the Pensions Board) is a statutory body set up under The Pensions Act and regulates occupational pension schemes, trust Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) in Ireland. Of primary concern to the Authority are the interests of pension scheme members. The Authority also provides advice to the Minister for Social Protection on pension matters generally.

The Authority's role in monitoring and supervising the operation of The Pensions Act seeks to ensure compliance with the provisions of The Pensions Act and the regulations made under it. Where there is non compliance, the Authority has various powers including the imposition of fines and to move to prosecution.

The Authority also provides information and promotes participation in the pension system in Ireland.

The current pension system in Ireland is a voluntary system. Broadly speaking, this means that, subject to any commitments regarding pensions in the contract of employment, there is no legal obligation on an employer to establish or contribute to a pension scheme. Where employers choose not to establish a pension scheme for employees there are obligations under law to which the employer must adhere, namely providing employees with access to a standard PRSA.

Since 15 September 2003, all employers are obliged by law to provide access to a standard PRSA for all 'excluded employees'. A PRSA is a personal pension plan or contract between the individual and the authorised PRSA provider. It is essentially a long term investment account which allows the individual to save for retirement. A standard PRSA has limits on the amount of charges that can be applied and the funds must be invested in a particular manner. An employee is considered an 'excluded employee' if:

  • their employer does not offer an occupational pensions scheme, or
  • they are included in an occupational pension scheme for death-in-service benefits only, or
  • they are not eligible to join the company’s occupational pension scheme or will not become eligible to join the scheme within six months from the date they began work there, or
  • they are included in an occupational pension scheme which does not permit the payment of Additional Voluntary Contributions (AVCs).

Under The Pensions Act, an employer is obliged in respect of its 'excluded employees' to:

  • Enter into a contract with a PRSA provider. (No charge is involved in this.)
  • Notify all 'excluded employees' that they have a right to contribute to a standard PRSA.
  • Allow the PRSA provider or intermediary reasonable access to the 'excluded employees' at their workplace.
  • Allow reasonable paid leave of absence, subject to work requirements, so that 'excluded employees' can set up a standard PRSA.
  • Make deductions from payroll at their employees' request* to the designated provider.
  • Advise the employee in writing (normally on their pay slip) at least once a month of their total contribution, including the employer's contribution (if any).

The employer is not obliged to contribute to the PRSA but is obliged to provide access to it in order to facilitate the employee in saving for retirement.

*Where the employer is requested to make the deduction from payroll on behalf of the employee to the designated PRSA provider, the employer must send the contributions, along with any employer contributions, to the PRSA provider within 21 days of the end of the month in which the contributions were deducted.

Where an employer has set up a pension scheme for its employees, the Authority, in ensuring compliance with The Pensions Act, is particularly concerned with the obligation on employers to deduct and remit pension scheme contributions on behalf of pension scheme members in accordance with the prescribed statutory timelines.

As a result of amendments made to The Pensions Act in 2002, where an employer makes deductions from the wages or salary of an employee, there is a statutory requirement on the employer to pass on the contributions to the relevant party (trustee/PRSA provider) within 21 days from the end of the month in which the deduction was made. This obligation extends to the remittance of all pension scheme contributions made by the employee including to defined benefit schemes, defined contribution schemes, PRSAs, and in respect of AVCs.

In addition, all employer contributions payable in respect of a defined contribution scheme and expressed as a cash amount or as a percentage or proportion of an employee's wages/salary and payable in respect of that employee, must be paid within 21 days of the end of each month to the trustees of the scheme or another person on their behalf.

The core function of the work of the Authority is regulation and ensuring compliance with The Pensions Act. Where there is non compliance by an employer in respect of its obligations to deduct and remit contributions, the Authority reserves the right to prosecute at all times.

The Authority encourages compliance. Where there is non compliance, the Authority can use its statutory powers to enforce the law. As of 17 September 2007, if an employer contravenes certain specified provisions of The Pensions Act, the employer may be liable to an 'on-the-spot' fine of €2,000 from the Authority.

On-the-spot fines which could apply to employers are primarily concerned with the timely communication to relevant parties including the Authority, scheme members, trustees or another person to whom contributions may be paid. Timely communication between the employer and these parties is essential to the proper organisation and administration of a pension scheme.

Employers must undertake the following steps to ensure that they do not receive an on-the-spot fine.

  • Respond to any requests that they may have received from the Authority for information in relation to their occupational pension scheme or PRSA obligations.
  • Respond to any requests for information about their occupational pension scheme that they may have received from:
    • the scheme trustees
    • the scheme actuary
    • the scheme auditor
  • Where an employer has entered into a contract with a PRSA provider and deducts PRSA contributions from the employees' wages or salaries, the employer must advise the employees in writing, at least once a month, of:
    • The total amount deducted from the employees' salaries or wages and paid to the PRSA provider and
    • the total amount, if any, paid by the employer to the PRSA provider on behalf of the employees.
  • Where an employer operates an occupational pension scheme and deducts any sum from the wages or salaries of the employees for payment to the trustees or to another person to whom the employer pays the contributions directly, the employer must advise the employees concerned and the trustees or other person, in writing, at least once a month, of:
    • The total amount deducted from the employees' salaries or wages and paid to the trustees or other person and
    • the total amount, if any, paid by the employer on behalf of the employees to the trustees or other person.

Trustees have important duties and responsibilities under The Pensions Act and Trust law generally. Trustees are essential to the operation of the Irish pensions system, the assets of which are valued at approximately €80 billion in savings.

Legislation, as of 1 February 2010, stipulates that every trustee must undertake trustee training in accordance with The Pensions Act. The Pensions Act provides that employers who operate pension schemes must arrange for the trustees of their scheme (and, in the case of a trustee which is a body corporate, for all the directors of that body corporate) to receive appropriate training.

However, an employer is not required to arrange appropriate training for a pensioner trustee or a professional trustee. A pensioner trustee is a status conferred by the Revenue Commissioners on individuals or firms with specialist knowledge in the area of pension law and pensions administration. A professional trustee, sometimes referred to as an 'independent trustee', works in the same way as other trustees and has the same duties, powers and responsibilities, but brings professional expertise and experience to the trustee board and tends to charge professional fees.

Trustees are required to receive training within six months of their appointment and at least every two years after that.

Trustees will be required to receive training on:

  • The Pensions Act, the regulations made under it and any other law that affects the operation of their scheme or trust RAC.
  • The duties and responsibilities of trustees.

The Pensions Authority has an online trustee training programme available free of charge on its website. The training is broken down into nine interactive modules, which you complete in your own time and at your own pace. On successful completion a certificate is awarded.

The Pensions Authority has long supported trustees by producing the Trustee handbook, issuing updated FAQs on changes in legislation or to regulations, publishing a range of information booklets and operating an enquiry service on (01) 613-1900 or at info@pensionsauthority.ie. The Authority also provides a list of registered trustee trainers on its website.

This factsheet was written by The Pensions Authority, Verschoyle House, 28-30 Lower Mount Street, Dublin 2. For further information please contact Maura Howe at maurahowe@pensionsauthority.ie.

The Pensions Authority has prepared this factsheet for the CIPD and its members to assist in the understanding of employer obligations towards pensions. We have made every effort to ensure that it is correct, however no liability whatsoever is accepted by the Pensions Authority, its servants or agents for any errors or omissions in the information contained in this factsheet or for any loss occasioned to any person acting or refraining from acting as a result of any statement in this factsheet.