The government has approved the details of its new pension auto-enrolment scheme in what Minister for Social Protection Heather Humphreys described as a "generational reform" of the Irish pensions system.

The General Scheme of the Automatic Enrolment Retirement Savings System has now been referred to the Joint Oireachtas Committee on Social Protection for pre-legislative scrutiny.

If passed into law, the scheme will require workers to pay into a voluntary workplace pension scheme, co-funded by their employer and the state on an opt-out rather than an opt-in basis.

Employees will have their savings matched on a one-for-one basis by their employers, and the state will also provide a top-up of €1 for every €3 saved, meaning that for every €3 saved by an employee, their employer and the state will contribute €4.

It is expected the system will come into force in early 2024, and that an initial 750,000 workers will be enrolled into a new workplace pension scheme

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"The delivery of Auto Enrolment has been a key priority for me since my appointment as Minister for Social Protection. Earlier this year I published the final design principles for the Automatic Enrolment Retirement Savings System for Ireland. Since then, a lot of work has been undertaken in progressing its implementation," Humphreys said.

"This includes the drafting of the Heads of Bill which I am pleased to say have now been approved by Government. This represents a historic milestone in the journey towards enabling people who are currently without occupational pension coverage to save for their retirement.

"After decades of talking about Auto Enrolment in this country, I am pleased to say the AE train is now very firmly on the tracks and leaving the Station ahead of its introduction in early 2024.”

Humphreys went on to say that the auto-enrolment would enable people to enjoy financial security in retirement, and that the opt-out function would combat "pension inertia," getting workers to start saving earlier while providing employer and state support for them.

Announcing the bill in March, the government said the scheme would cost some €3bn over its first 10 years.

Employees will be allowed to opt-out of the scheme after six months, but they will be reenrolled after two years, and taxpayers will not be allowed to access their pension early except in cases of illness.

Employer and employee contributions would start at 1.5% in 2024, increasing by 1.5 percentage points every three years until reaching 6% in 2034. Matching contributions will be made by employers to contributions made by employees up to a maximum of €80,000 of earnings.

Arnold Dillon, director of Ibec's Retail Ireland group, last month highlighted pension auto-enrolment as one of several slated increases in the cost of labour for businesses in the coming years alongside the living wage and statutory sick pay.

The Competition and Consumer Protection Commission (CCPC) said that last month nearly a quarter of workers aged 55-65 don't have a pension plan.

(Pic: Getty Images)