From January 2026, Ireland will introduce a nationwide auto enrolment pension scheme, formally known as the My Future Fund. This initiative is a cornerstone of the government’s strategy to address the country’s low levels of private retirement saving. With only about 35% of private sector employees currently contributing to a pension, the government aims to increase coverage to 70% and beyond.
The concept is straightforward: employees who do not already have a qualifying pension will be automatically enrolled. While this this pension auto enrolment model represents a positive step forward in improving retirement security for the wider workforce, for high earners, including 40% taxpayers, business owners, and high-net-worth individuals, the scheme presents serious limitations.
In particular, the state’s flat-rate contribution structure and restrictions on flexibility may prove far less advantageous than existing private and company pension arrangements. For this reason, it is critical that high earners seek expert pension advice before defaulting into auto enrolment.
This article explores the implications of auto enrolment for high earners, compares the state scheme with private pensions, highlights the benefits of company schemes, and explains why retaining control through tailored arrangements can provide superior long-term outcomes.
Under the new system, employees aged 23 to 60, earning €20,000 or more annually, and not already in a qualifying scheme will be automatically enrolled. Contributions will be made by the employee, the employer, and the state, phased in over a ten-year period:
However, contributions are capped at earnings of €80,000, and withdrawals are not permitted until retirement age (currently 66). Employees will also be automatically re-enrolled every two years if they opt out.
Perhaps the most significant issue facing high earners under auto enrolment is the replacement of traditional tax relief with a flat 33% state top-up.
Under auto enrolment, however, the state’s top-up is capped at 33%, reducing the effective relief for higher earners from 40% to just 25%. Over a lifetime of contributions, this differential can result in a substantial shortfall in retirement savings.
For individuals earning well above the €80,000 contribution ceiling, the limitation is even more pronounced. A large portions of their income falls outside the scheme, meaning they cannot benefit from pension contributions on that income. Consequently, private or company arrangements remain far more efficient for wealth accumulation.
Another drawback of auto enrolment lies in its restricted investment menu. Employees will default into a lifecycle fund that automatically reduces investment risk with age. While three additional funds (low, medium, and high risk) will be available, the range remains narrow compared to private or company pension schemes.
For high-net-worth individuals, tailored investment portfolios are often essential to align with broader wealth management plans. This lack of choice, therefore, represents a major limitation.
Auto enrolment also excludes access to professional financial advice, leaving participants without guidance on integrating pension planning with their wider tax or estate strategies.
Private pensions and company schemes offer a level of flexibility that auto enrolment cannot provide. For example, members of occupational pensions may access benefits from age 50, depending on their circumstances. Auto enrolment, by contrast, locks in funds until the state retirement age of 66.
For high earners and business owners, flexibility is often as important as tax relief. Pensions can play a role in succession planning, liquidity management, and overall wealth diversification. Being unable to access funds until age 66 may, therefore, restrict opportunities to use pensions as part of a comprehensive financial strategy.
The following comparison highlights the key differences between the two systems:
For high earners, the advantages of private and company pensions are clear: superior tax efficiency, greater investment choice, and more flexible access.
For business owners and high-income professionals, establishing a company pension scheme offers advantages that go well beyond those of auto enrolment. Key benefits include:
These features make company pensions a compelling choice for 40% taxpayers and high-net-worth individuals, offering flexibility, efficiency, and protection that state-mandated auto enrolment cannot match.
While auto enrolment will be adequate for many employees—particularly those without any pension coverage, it may not serve the interests of higher-income individuals.
Professional pension advice is essential for high earners for several reasons:
The choice is not simply between auto enrolment and inaction. High earners have the opportunity to craft pension solutions that align with their financial goals, both personal and business-related.
For employers, the introduction of auto enrolment carries additional responsibilities. All eligible staff must be enrolled, contributions deducted via payroll, and matching employer contributions provided. These costs will rise from 1.5% to 6% of salary over a decade.
Yet for business owners, there is also an opportunity: setting up a private or company pension scheme now can exempt employees from auto enrolment, while also enhancing recruitment and retention strategies. In competitive markets, offering superior pension benefits demonstrates a commitment to employee wellbeing and provides a clear edge in attracting top talent.
As the deadline approaches, high earners and business owners should:
The government’s auto enrolment pension in Ireland is a welcome reform for broadening retirement savings coverage. However, for high earners, business owners, and 40% taxpayers, it is far from optimal. Reduced tax relief, capped contributions, limited investment options, and inflexible access rules all undermine its value compared to private or company pension schemes.
By contrast, company pensions offer higher relief, flexibility, wider choice, and superior benefits. For those with significant income and assets, they remain the most effective vehicle for retirement planning.
At Fairstone, our expert pension advisors specialise in guiding high earners and business owners through these complex decisions. We understand that auto enrolment may not provide the optimal solution, and we work with clients to design pension strategies that maximise efficiency, flexibility, and long-term wealth.
Book a no-obligation retirement planning consultation with Fairstone today and take the first step towards securing a retirement strategy that reflects your income, goals, and ambitions.
Source: gov.ie
Information correct as of 02/09/2025
This article is for general information purposes only and is not an invitation to deal or address your specific requirements. Any expressions of opinions are subject to change without notice. The information disclosed should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information of the various source material, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.
