The impact of My Future Fund on SMEs

Early preparation will help ensure a smooth transition when auto-enrolment goes live in January 2026. The scheme is designed to help over 800,000 private sector workers – who currently don’t have access to (or haven’t joined) a workplace pension – start saving for their retirement¹.

Many of these employees work for small and medium-sized businesses. In a recent survey conducted by Zurich, we found that just 36% of small companies are aware of the upcoming AE requirements².

The importance of SMEs in Ireland

It is no overstatement to say that SMEs form the backbone of the Irish economy. Defined as companies employing less than 250 people, they make up 99.8% of all businesses in Ireland and employ around 1.8 million people – almost 70% of total employment in the economy, according to the Central Statistics Office (CSO) in 2021.

The vast majority (92%) of these companies are micro-enterprises employing less than 10 people while another 6% are classified as small – employing less than 50.

AE challenges for SMEs

It is likely that many SMEs will encounter significant challenges in meeting the requirements of the new scheme. Participation is mandatory and employees who earn €20,000 or more per year, are aged between 23 and 60, and are not already in a workplace pension plan, will need to be automatically enrolled into the scheme.

The only exception applies to companies that already have a pension scheme where all employees eligible for auto-enrolment are contributing. These existing schemes must also meet the minimum contribution requirements set by the state scheme. For the first three years – from 2026 to 2029, those contributions are set at 1.5% of the employee’s total earnings for both the employer and the employee with the State adding 0.5%. Those rates will rise in increments of 1.5% every three years for employers and employees until they reach 6% each in year 10.

The State contribution will reach 2% by that stage. The first issue facing SMEs and microenterprises is cost. According to a Small Firms Association (SFA) survey carried out in mid-2024, SMEs had experienced an average increase in business costs of 16.6% in the previous year. And that was before the recent increase in the minimum wage.

Those businesses are already experiencing significant cost pressures and are facing into a period of considerable uncertainty as a result of new tariffs and disruptions to global trade. An increase of 1.5% on the payroll bill will only add to that pressure.

There is also the possibility of knock-on cost increases with employees seeking pay increases to make up for what they may perceive as a 1.5% cut in their gross pay. The added administrative workload is expected to be a significant challenge, especially for smaller SMEs. Most do not have a dedicated HR professional, and often the owner-manager handles both HR and finance tasks.

Supporting employees with AE

Joining the auto-enrolment scheme will introduce another layer of complexity to their responsibilities. The fact that employees will be able to opt out of the scheme after six months and must be re-enrolled two years after that adds to the compliance demands.

Of course, those SMEs that retain the services of external payroll providers will find the going easier, but they will need to make sure the provider is ready for the scheme when it comes into being.

Larger and better resourced SMEs are likely to face other challenges. They may already have a pension scheme in place, but it may not be open to all employees and even if it is, if it is not mandatory the likelihood is that at least some employees will not be contributing.

These companies may need to manage both their own pension scheme and the State scheme at the same time, which can create extra administrative and practical challenges. For example, if an employer contributes 5% of an employee’s salary to the company scheme but only 1.5% to the State scheme, it could cause dissatisfaction among employees.

Currently, the only solution is to encourage all employees to join the company scheme. However, this can be challenging, as you cannot make a voluntary scheme mandatory without each employee agreeing to a change in their employment contract.

How Zurich can help

At Zurich, we understand the unique pressures facing SMEs as they prepare for AE. Our Customer Relation Management team have extensive experience supporting businesses of all sizes through pension changes and regulatory updates. We offer practical guidance and tailored solutions to help you understand your options and navigate the new requirements with confidence. Whether you’re setting up a new workplace pension, reviewing your existing scheme, or managing the administrative impact of running two schemes side by side, Zurich is here to help. We can work with you to:

• Assess your current pension arrangements and identify any gaps.
• Explain the implications of auto-enrolment for your business and your employees.
• Provide clear, step-by-step support throughout the implementation process.
• Offer communication tools and resources to help your employees understand the benefits of workplace pensions.

The bright side

SMEs need advice now – well ahead of the scheme’s launch. While the Government will offer general guidance, many businesses – especially those new to employee pension provision – will benefit from tailored professional support. Although the transition may present challenges, auto-enrolment is a welcome and long-awaited change.

The State pension provides a foundation – building additional savings can help people achieve their retirement goals. A workplace pension brings real advantages for both employees and employers, increased employee loyalty, and more open conversations about retirement planning.

Looking at the UK’s experience, auto-enrolment has had a major impact. Since its introduction in 2012, the percentage of eligible employees participating in workplace pensions grew from 56% to 88% by 2023, according to the UK Department of Work and Pensions. The Irish scheme could achieve similar success, especially for those not yet in a pension scheme.

There may be some challenges along the way, but with Government support and professional advice, SMEs can navigate them. By embracing auto-enrolment, businesses can help employees build a brighter financial future – benefiting everyone in the long run.

Find out more

Speak with a Financial Broker or visit zurichcorporate.ie to find out more about Zurich’s corporate pension solutions.

Sources:

¹Overall Pension Coverage Pension Coverage 2024 – Central Statistics Office

²The Zurich Auto-Enrolment Awareness Study was conducted by 3GEM Research in May 2025. The survey captured responses from 1,000 individuals and 250 businesses across the Republic of Ireland, with quotas applied to ensure a representative sample by age, gender, region, and employment sector. Respondents included both PAYE and self-employed workers, as well as business owners and senior decision-makers in SMEs and larger firms.