Jerry Moriarty, CEO of the IAPF

“The CSO stats show just 50.4% of workers are currently contributing to an occupational or private pension which is a welcome improvement on the 2018 figure of 47%, though that still leaves half the nation who will still have to primarily rely on the State pension in old age.  We have an ageing population with the 2016 Census report showing that there are now 296,837 males and 340,730 females aged 65 or older in Ireland. Those numbers are set to grow substantially over the next 10-15 years driving up the cost of retirement provision to the State. If the levels of private and individual pension provision remain as low as they are now, the Government will come under pressure to do more for pensioners as the current State Pension is set at a level to just keep people out of poverty. And, with the growing numbers of people receiving this, it will be difficult to even sustain it.

The last Public Service Pay Commission report found that while there is almost 100% pension coverage in the Public sector and some parts of the private sector, the overall figure for the private sector is just 40%. Those who fall outside this 40% will be reliant on the State pension in retirement.

Coverage for those in the 25 – 34 year age bracket is below the average participation rate at 44.8% and really should be far higher because the time to commence saving for retirement is when your disposable income is at its highest. It’s likely that the majority of these workers with pensions are in medium to large companies where pension benefits are normally offered. The other 6 out of 10 workers without such benefits don’t appear to be taking any action to plan for retirement which is a shame.

It’s likely that many people are simply unaware of the importance of starting early and the compounding effect of investment growth on the savings they make in their twenties and thirties.

It is often assumed that the core reason for not taking out a pension is affordability, but it is not that simple. There are a myriad of reasons, including a deep lack of understanding of how pensions work and how important they are, coupled with an element of mistrust in a pension system so complex that even the experts struggle to get their heads around it. The stats also show 25% of people who have access to a pension with their employer aren’t joining, despite the fact that they are losing out on their employer paying into their pension. This seems illogical. In the vast majority of employer pension schemes the employer is willing to match or exceed the employee’s contribution. Between this and the tax relief I wonder if these employees realise how much money they are forgoing. Taking a typically employee on €40,000 where they and their employer can each contribute 5% of salary into a pension, they are missing out on €2,000 from their employer and €800 in tax relief.

Many first world countries have already acted to solve the pension problem, our Government has committed to introduce an auto-enrolment scheme, where all workers are automatically enrolled in a savings scheme with the possibility to opt-out after a certain period. According to the report, 36% of people don’t have a pension as they simply haven’t got around to organising it – the planned auto-enrolment should solve this issue. We believe the Government needs to act decisively to ensure this is delivered as planned in 2022.”

Read the full report from the CSO here.