Compiled by Aviva, the research shows every Irish worker with a private pension will have to save an extra €9,100 a year on average or face a seriously reduced standard of living on retirement, figures reveal. The pensions savings gap of over €20bn is the third worst after Britain and Germany.
Aviva said the pensions saving gap, the difference between expectations for retirement and what is actually being saved, is so dire that thousands of workers are looking at very bleak retirement prospects.
Workers will be forced to pay for their old ageby selling their homes, putting off retirement, or “accepting a significantly reduced standard of living“, warned Aviva chief Jim Dowdall.
The largest savings gap was seen in Britain, where the deficit is €12,300 per person, followed by Germany with €11,600.
Aviva said the estimates are based on a calculation of the savings that would be required for those currently in employment to retire on 70% of their final salary.
The amount of additional investment varies according to age. Workers aged 20 need to set aside an average of €1,700 per year, but that rises sharply to €21,100 for people aged 60.
The survey also found that the Europe’s workers need to be allocating €1.9 trillion more than they are currently pumping into their pension plans.
This deficit raises several issues, including people working well beyond the retirement age of 65.
Statistics from other EU countries point to the number of people working beyond retirement age doubling in the next 10 years, Aviva said. It warned the retirement age would not be enough on its own.
That solution was strongly resisted by French citizens when the government tried to raise the retirement age form 60 to 62. As reported previously, in 2051 about half of the current population will have reached retirement age, a three-fold increase against the number of people aged over 65 today.
Dowdall warned the change in demographics would place a huge burden the economy as the numbers working to fund those in retirement falls from a ratio of six to one down to two to one.
Dowdall called for a number of key changes to be made to create greater awareness on the pension scene and to give workers a greater sense of what was happening to their pension investments.
He recommended issuing annual pension statements to show their projected total pension; and a European quality standard for pensions should be in place to demonstrate the quality and security of products and to increase consumer confidence.