70% ignorant on pensions, survey reveals

OVER 70% of people fail to understand the tax relief available to them on pensions, a new survey has found.

Bank of Ireland Life yesterday issued the shock findings in conjunction with the start of its annual drive to win market share on the pensions front.

Nearly half of workers do not have a retirement plan and the bank said that this latest finding should help the Government in its battle to tackle the country’s emerging pensions crisis.

However, the research also shows that 60% of people without a pension claim they can actually afford to contribute to one every month, even though they still had not started one.

Commenting on the findings, Brian Sullivan head of pension sales Bank of Ireland Life said: “It appears that awareness of the pension tax benefits is now the main barrier to pension take-up and not affordability as previously thought.”

Given that over 1.2 million people in this country took out an SSIA, which offered a 25% Government bonus, the findings are significant, he said. In reality a pension can offer almost double this incentive through tax relief, he said.

To help sell pensions, the bank has advisers in every branch to explain the tax relief available simply and to set up a pension. What many younger people fail to realise is that starting a pension early with small contributions initially and then gradually building them up, “can make a huge difference to the size of your pension fund in the long run”.

One of the great difficulties facing those who delay saving for their retirement is, as they get older, they face significantly heavier demands on their cash flow.

Even delaying by just five years can reduce retirement funds by almost a third, according to Mr Sullivan.

While salaries generally increase with age, in most cases individuals find that as they get older cash flow falls as increased personal and financial responsibilities place a much bigger demand on disposable income, he said. The survey also found the biggest group of people without a pension, but who could afford to pay into one were in the 25-35 year category. That was also the most opportune time to start a pension, said Mr Sullivan.

The tax benefits of starting a pension are particularly relevant to the self-employed, who must file their annual tax returns before October 31 this year.

Previous research conducted by Bank of Ireland Life, indicated that just one third of the self-employed contributed to a pension. That was worrying given that the number of small business owners has increased by over 68% in the last four years and accounts for over 10% of workers.