If workers knew how badly served they will by their pension plans, the Irish Association of Pension Funds (IAPF) said they would be outraged.
“It is only lack of understanding of how annuities and Approved Retirement Funds work and the fact that few DC members have retired yet that is preventing howls of protest from the already hard-pressed PAYE members of defined contribution schemes”, said Joe Byrne, chairman, IAPF, in a statement issued yesterday.
The problem for the PAYE sector is that, having taken a lump sum on retirement they have to put the balance of their pension into an annuity bought from an insurance company.
The pension fund body has condemned annuities as expensive, poor value and lacking in the flexibility required to give workers scope around how and when to retire on full or partial pension.
That situation contrasts sharply with PRSA holders, directors or the self-employed who can also take a portion of the pension as a tax free sum.
However, they are not obliged to buy poor performing annuities, said Mr Byrne. They have the option to buy an Approved Retirement Fund (ARF) which carries greater investment options on retirement. An ARF is likely to provide much better returns to pension holders because of the bigger range of options on offer and is likely to provide a much better income in retirement than an annuity.
The criticism come in the wake of a threat from Minister for Social Affairs, Seamus Brennan to automatically include all workers in a pension scheme.
With many failing to save for retirement Mr Brennan said more attractive savings options for retirement had to be considered.