Why Auto-Enrolment Could Cost You in Tax Efficiency

From 2026, Ireland’s new auto-enrolment pension system will begin rolling out. It aims to close the pension coverage gap for workers without private retirement savings. For many, it’s a welcome nudge toward future financial security.

But if you are a higher earner, waiting for auto enrolment could come at a real cost. The scheme is not designed with higher rate taxpayers in mind, and delaying your own planning could reduce your tax efficiency and retirement outcomes..

Below, we outline five clear reasons to take control of your pension strategy now.

1. Auto-Enrolment Is Not Designed for High Earners

Auto-enrolment will start at a contribution rate of just 1.5% (matched by employers and the State), rising to a maximum of 6% by 2034. These modest rates may benefit lower income earners, but they fall well short of what higher earners typically require.If your income exceeds €100,000, the contribution structure will not support the retirement lifestyle you expect. A tailored, tax efficient plan is essential for closing the gap and achieving long term financial independence.

2. You Could Miss Out on Valuable Tax Relief

Higher-rate taxpayers currently enjoy tax relief of up to 40% on personal pension contributions. This is one of the most generous incentives in the Irish tax system.

Auto enrolment does not match this. Instead, the State applies a top up model that equates to roughly 25 percent tax relief. For higher earners, this is significantly less efficient.

By proactively contributing to a Personal Pension, PRSA, or Executive Pension, you can continue to maximise the full 40% relief, and build retirement wealth more effectively.

3. You Lose Investment Control and Flexibility

Auto-enrolment will place your pension into a State selected investment fund. While this suits many workers, it may not align with your risk appetite, financial goals or long term estate planning needs.

By getting ahead of the scheme, you can choose how and where your pension is invested. You can tailor your portfolio, adjust risk exposure and integrate tax efficient strategies that support both your retirement and your legacy planning.

4. Contribution Limits Restrict Higher Earners

The auto-enrolment scheme will have earnings limits for calculating contributions (€80,000 in the current design). If your income exceeds this threshold, the excess will not receive State support.

A professional pension strategy allows you to plan for your full income, using additional vehicles such as PRSAs or AVCs to maximise tax relief, grow wealth efficiently and avoid unnecessary limits.

5. Auto Enrolment Will Be Compulsory from January 2026

Auto-enrolment will become compulsory from January 2026, and most workers without a qualifying pension will be enrolled automatically. With the start date only weeks away, the structure of the scheme is well publicised.

For higher earners, waiting until the scheme begins may limit the scope of your pension planning. Acting now allows you to design a structure that works more effectively within existing caps and thresholds, rather than relying on the narrower contribution model under auto enrolment. It also provides greater control over investment choice and tax efficiency before the State system begins.

Final Thoughts

Auto-enrolment is a step in the right direction for broadening pension coverage, but it’s not a one-size-fits-all solution. For higher earners, it’s a starting point, not a solution. By taking early action, you can:

• Maximise your tax relief
• Design a more flexible and efficient pension strategy
• manage contribution caps and State limits more effectively
• ensure your full income works toward your future within allowable thresholds

Chartered Capital helps high-income individuals and business owners build smart, tax-efficient retirement plans. If you want to ensure you’re making the most of your pension opportunities before auto-enrolment kicks in, we’d be happy to help.

👉 Book a consultation to review your current pension strategy and start building a retirement plan that supports your lifestyle and long term goals.

The content of this article is for information purposes only and does not constitute a personal recommendation. You should always speak to a financial adviser that is regulated by the Central Bank of Ireland when considering financial advice. Any recommendation made will be based on a full suitability assessment that will include a comprehensive review of your circumstances, needs and objectives. Past Performance Is Not A Guide To Future Returns.