Employers worried by retirement issues

ALMOST two-thirds of employers are concerned that their staff may be unable to afford to retire when the time comes.

Despite this more than a third said it is not company policy to allow employees work beyond normal retirement age, according to PricewaterhouseCooper’s 2011 pension survey.

It also found that two-in-five respondents have implemented reduced pension benefits while just over a quarter have sought increased employee contributions to help manage the deficit.

PwC pensions partner Alan Bigley said: “The survey shows the extent of change happening in Irish pension schemes and following Budget 2011 this change is likely to continue.”

He said that given that pensions remain now a “significant” part of the overall remuneration structure and with the erosion of tax reliefs, there is evidence of risk emerging that employers and employees will disengage from the pensions process.

“This will only lead to future challenges for the pensioner in retirement through less income, with the state funding a greater proportion of total retirement income than currently is the case and at a time when it can least afford it,” he said.

Nearly three-quarters of respondents said they had not considered the implications of the increased state pension age on their employees. Of the 30% who had considered the implications, just 8% were considering any changes to the pension scheme as a result.

The survey among 300 firms also found two-thirds of employers expect the changes made in Budget 2011 will make the provision of pension benefits less attractive for them.

Pensions director with PwC, Munro O’Dwyer, said: “In an environment where individual employees are becoming less able to handle debt concerns budgeting to meet household expenses, and the financial implications of both expected and unexpected life events, the survey highlights the real concerns that come as a result of the tax changes in the pension system.

“Where further reductions in personal tax relief were to be implemented, the impacts would be to change pension saving habits — perhaps irreversibly.”

According the survey, 57% of companies provide pension benefits through defined contribution arrangements, 30% through defined benefit arrangements, 8% through Personal Retirement Savings and 5% through a Hybrid.

“Given the continued uncertainty in investment markets, longevity and increased taxes, the likelihood of futurepension deficits is an area that will need to be kept under close review,” said Mr Bigley.