700,000 fear income shortfall in retirement

As many as 700,000 people fear that they will not have sufficient income when they stop working with an even greater number depending solely on the state pension to provide for their retirement.

The details contained in a new report released yesterday by life assurance company, Friends First further highlight the scale of the potential problem facing thousands of workers that has previously been described as a “time bomb” by industry experts.

The survey conducted on workers aged 25-35 revealed that 830,000 adults are relying on the state pension for their retirement, with fewer than one in five of those confident it will adequately provide for their retirement.

Commenting on the research, Friends First pensions and investment director, Simon Hoffman described the situation — which he said had not improved despite somewhat of an economic revival of late — as alarming.

“Despite the recent upturn in the economy there has been no major increase in the amount of private pension cover among adults in Ireland. This means that a significant portion of the Irish population are relying on the state pension and a large number of these are fearful of not having enough income in retirement.

“Private pension coverage is alarming low particularly among women and those under 35 years of age,” said Mr Hoffman.

Women lag significantly behind their male counterparts with regard to pension coverage with 63% of women surveyed replying that they do not have any pension compared with 45% of men.

A lack of education is one of the factors outlined in the report as contributing to the lack of coverage, particularly among younger workers.

While more than 55% of those surveyed said they could not afford a pension, a further 27% cited a lack of time or understanding as the reason they are yet to take out a pension.

One in four people said, however, that a better understanding of how pensions work would convince them to take out private coverage.

“Our research demonstrates that there is a need to educate people on the necessity of pensions and the benefits of saving for retirement.

“In particular we need to make sure that people understand the added benefits for those who start saving earlier and that saving, even a little, from the very start of your career will make a huge difference.

“The reality is that those without a private pension may struggle financially in their retirement.”

The Friends First report reveals strong support for an auto-enrolment system similar to that favoured by Social Protection Minister Joan Burton.

Of those surveyed, 77% of adults believe that auto-enrolment into a pension scheme is a good idea and 30% believe that access to pension funds in times of financial difficulty would encourage people to take out private pensions.

In March, Ms Bruton outlined her preference for an opt-out system that she described as a proactive method of tackling the issue of uneven and low private pension coverage.

Last week, a separate report by LCP Ireland showed that deficits in the defined benefit schemes of some of the largest Irish companies more than doubled between January and August of this year as falling bond yields and the effects of the pension levy took their toll.

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