77% will not have enough money in retirement

Although as a nation Ireland is not engaged in adequate financial planning for retirement, we are very open to it and we recognise that in the face of an ageing population a compulsory option might now be needed.

This is according to findings from a recent nationwide survey commissioned by the IAPF which revealed that 77% of respondents believe they are not saving enough for a reasonable standard of living in retirement – with 23% saying they are not saving anything at all.

Speaking at IAPF’s annual Defined Contribution conference this morning (Thursday) Jerry Moriarty, its CEO of gave his thoughts on the results, “The pensions sector and the Government know that we are facing a major national problem when it comes to pensions – outside of employer schemes, people are simply not saving enough – if at all. So the results of the survey, while worrying, are not surprising. More importantly they reinforce the urgent need to develop and implement a long-term pension policy.

However, what we believe to be the most revealing element of the survey is that 70% of people say that they would be in favour of the Government introducing a type of mandatory pension scheme to encourage more people to save for their retirement. So in fact, the Irish public do recognise that there is insufficient retirement planning taking place, and they are cognisant of the fact that something more drastic than just encouraging people to save into a pension may need to be done. The percentage support for the Government’s plan is even higher amongst older people (55+) at 80% – many of these respondents are already retired and so have a better understanding of exactly how much people in retirement need to live on”.

Jerry continued, “The only way in which we can tackle the pension crisis is by engaging with the people that are most affected – those workers with little or no pension provision. Ultimately, we need “buy-in” from this group. So it bodes well for the Government’s plans to introduce some form of compulsory pension scheme that the majority are open to this initiative”.

The IAPF survey revealed that men and women have pretty much the same opinions when it comes to whether or not they are saving enough for retirement. However, people in different age brackets seem to vary in opinion.

Jerry explained, “Worryingly the lowest % of people who feel they will have enough for a reasonable standard of living in retirement are in the 35-54 age group at just 20%. Not surprisingly, this is the same group whose relatively wealth was most impacted by recession.  A higher percentage of those over 55 believe they will have reasonable standard of living in retirement, but it’s still disappointing at 31%. Clearly there’s a massive divergence between our aspiration for an enjoyable retirement and our actions through our working life to make it happen.”

When asked “Do you believe that you or your employer are saving enough to give you a reasonable standard of living in retirement? 
Respondents answered as follows:

 Pension survey

Jerry went on to say, “Broadly speaking most of the people surveyed are open to the suggestion of a mandatory pension scheme, but middle aged adults (35-54) appear to be slightly more reticent about it – this might be to do with the fact that they could be the group who are most financially stressed at this point in time – many/ most with mortgages and possibly dependent children”.
When asked “Would you be in favour of the Government introducing a type of mandatory pension scheme to encourage more people to save for their retirement?

Respondents answered:

pension survey

Jerry concluded, “In February of this year the Tánaiste announced the establishment of a new Universal Retirement Savings Group to “develop a roadmap and timeline” for the introduction of a new universal supplementary retirement savings scheme – our survey results hammer home the real need for such an initiative sooner rather than later, and in a pre-election year the Minister and the Government alike should capitalise on the widespread support this survey reveals.

The crux of the matter is that the Government needs more action and less rhetoric – at this point it is important that we don’t just add to the many previous reports and recommendations that have not been implemented”.





Press Release14.05.2015


Income Protection – the important cog in your financial wheel

We all fund our lifestyle by spending our hard-earned income. This income is used to feed ourselves, to pay mortgages, to pay all the bills and to fund our lifestyles; new clothes, nights out and holidays etc. Our income is also used to pay our insurance premiums and hopefully to pay towards retirement planning! So what happens if we get sick or have an accident and this income stops? This is where income protection insurance comes in. A previous term used for this cover was Permanent Health Insurance(PHI).


What is income protection?
Income protection insurance is a product that in the event of you being unable to work due to illness or accident, the insurer will pay you a replacement income until your retirement date. Most Financial Brokers recognise the importance of maintaining an income and recommend to clients that they have adequate replacement income in place, should they be unable to work. For some lucky few individuals, their employer provides this salary protection cover. For most, they may end up reliant on modest state benefits. Indeed for the self-employed, they are entitled to nothing and as a result they really need to get their own income protection insurance in place.


Is income protection the same as payment protection on a mortgage or other loan
In a word, no. They are not the same product. Payment protection is a product that was predominately offered by banks to cover repayments on a mortgage or loan. However this cover usually only lasted for a year or so and had quite strict conditions attached. In fact payment protection insurance has a very chequered history and indeed was sold to people who often would never be eligible to claim. You may often see in the media thatbanks are now being forced to refund customers for payment protection policies that were mis-sold in the past.


Income protection is completely different. It covers your income in the event of illness or accident and the benefit is payable until you recover and are able to work again. If you don’t recover, it is payable until you reach your retirement age. In fact the state are supportive of people taking out income protection insurance. You get full tax relief at your highest income tax rate on the premiums you pay. Now this is one of very few ways left to get marginal rate tax relief on anything!


How much does it cost?
Like most products, it depends. The premium that you pay will depend on a range of factors such as;
• Your age
• Your occupation
• Amount of cover needed
• Your state of health
• Your choices in relation to a range of policy features

Where do you start? The best way to proceed is to contact your Financial Broker who will explain all of the options available and will prepare an income protection quote for you. And because your Financial Broker is impartial and deals with all of the product providers, they will find the best product for you at the lowest price available. You can then rest easy, knowing that at least your income is secure.


The case for mandatory pension schemes

In a recent survey conducted by the IAPF and iReach, it emerged that only half of those working are participating in a pension scheme. While older survey respondents showed a much stronger awareness about pensions, a huge 80% of those under 35 did not know how much (or how little) one receives from the State pension. While this is not altogether surprising, at what point does the awareness around pensions kick in, and at that point is it too late to start a realistic provision for retirement? Is it time to introduce a mandatory pension plan?


The Government has come up with a name for a new mandatory occupational pension but has not given any date for its implementation. The new MySaver scheme is designed for those without any pension in place other than the state pension, Minister for Social Protection Joan Burton said.

The Small Firms Association has signalled its opposition to the idea of a mandatory pension scheme for Irish workers.

In its submission to the Universal Retirement Savings Group, which is examining the issue on behalf of the Department of Social Protection, the SFA says mandatory pension provision will prove costly to employees, to business and the state, without any associated benefits in the long term.

Patricia Callan, director of the Small Firms Association, says the fundamental reason the SFA is opposed to the idea is that not enough work has been done to promote the voluntary approach to pension provision. Ms Callan says the SFA is also very concerned about any increase in the cost of employment, particularly at this time when small businesses are just about getting back on their feet. She says that many SMEs are not even engaged in the concept of pay increases as yet. A mandatory pension scheme would be an extra cost for SMEs because in any such scheme there is always an employer’s contribution as well as an employee’s contribution – which by and large comes back on an employer in the form of a pay claim – and an Exchequer contribution, which is funded by both employees and employers.

Ms Callan also says that a call for a mandatory pension scheme is an “over-reaction” as Ireland has a much younger population that the rest of the EU, which is following this mandatory trend and the economy has a lot of other measures which could be implemented to solve the pension crisis. She adds, however, that the Association does accept that a crisis does exist in the pension system.

The SFA director says that if there was more of a focus on getting people into work, on creating a better and more dynamic economy, then a pension crisis will not arise as the country will be able to fund a pension scheme better. “In particular, in terms of trying to persuade people that private pensions are the best way to go, we need better products, less charges and a much more guaranteed sense of return,” Ms Callan says.