The Short-Term Distributional Impact of Pension Auto-enrolment

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 autoenrolment. 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.