The Short-Term Distributional Impact of Pension Auto-enrolment

Abstract

The Irish government plans to introduce pension auto-enrolment with an initial employee contribution rate of 1.5 per cent eventually rising to 6 per cent. We examine the immediate distributional, poverty and inequality impacts of an auto-enrolment charge. We find that the bottom two income quintiles will see the smallest fall in disposable income, driven by the fact that only 2 per cent of family units in the lowest quintile and 18 per cent in the second quintile will actually be affected by auto-enrolment. There will be little impact on the at-risk-of-poverty rate. This is explained by the fact that the largest negative impacts on disposable income will be in higher income quintiles.