Social policy, pension auto-enrolment, and PRSI in Ireland

Ireland is preparing to introduce pension auto-enrolment for all workers, while increases to PRSI contributions have already begun. The reasons for these changes become clear when we consider demographic shifts and the expected increase in numbers of retirees compared to workers.

Demographic changes on the horizon

The National Economic and Social Council (NESC) recently published NESC@50: Ireland at a Pivotal Moment, reviewing half a century of economic and social policy in Ireland. The report features some eye-opening statistics about our ageing population and the worker ratio in Europe and Ireland.

Ireland is one of the youngest countries in the EU [with a median age of 38 compared to a European average of 44]. However, our population aged 65 years and over will double from 806,300 in 2023 to over 1.6 million by 2051, accounting for 26 per cent of the total population.”  

NESC@50: Ireland at a Pivotal Moment

What does this mean for the working age population and those in retirement? Effectively, there will be fewer workers in the economy generating the necessary income to support the state pension.

Predictions suggest that dependency ratios will change from around 4.5 people of working age to each older person in 2020, to 3.5 people of working age to each older person in 2030, and then to a ratio of a little over 2 people of working age to each older person by 2050 (Government of Ireland, 2021). There will also be an anticipated increase in age-related expenditure, estimated at an extra €7 billion per year (Department of Finance, 2021).”

NESC@50: Ireland at a Pivotal Moment

This changing population picture has a clear and present impact on financial planning for employers and employees alike.

As we consider the longer-term reality for Irish workers and society at large, the importance of pensions, financial mobility, and financial health checks cannot be overstated. It’s never too early to start mobilising and planning in these areas.”

Seán Murray, Director of Product Services, Zellis Ireland

The government response to the changing population

In order to avoid significant shortfalls, the Irish Government’s approach is to replenish the Social Insurance Fund. This is in preparation for the expected increase in demand for the state pension as more people reach the accessibility age.

This top-up is being pursued on two fronts – through pension auto-enrolment and an annual increase in PRSI contribution rates. This will accumulate to a total increase of 0.7% by 2028. A rise in the retirement age might also be a possibility, but nothing official has been announced on that front.

How can employers prepare for the changes?

While PRSI rises have already come in, further increases are expected. To facilitate financial planning and payroll changes, be aware of the schedule here: PRSI changes in Ireland: What’s new?

For pension auto-enrolment, get up to date with the latest announcements in our recent blog: Pension auto-enrolment Ireland: implementation update.

You can also find practical guidance on getting ready for the new scheme in our research report: Prepared for pension auto-enrolment? How employers in Ireland should get ready for the rollout.