A survey of nearly 6,500 defined contribution pension schemes found that, on average, even with their company’s input, a worker’s contribution only amounts to 11.1% of salary.
In schemes with fewer than 100 members, employees contributed less than 5% of their salaries.
The chief executive of the Irish Association of Pension Funds, Jerry Moriarty, said these employees need to increase their contributions.
“This level of funding on its own is unfortunately wholly insufficient and those involved in these schemes should consider either upping the level of contributions or looking at other retirement funding options,” he said.
Even in schemes where the contribution is higher than 10%, Mr Moriarty warned that people may be in for a surprise when they retire.
He said that “many workers in these pension schemes (even those with long service) may not achieve the comfortable retirement life they had planned unless they take more of an active role in their retirement planning and keep track of their own benefits, and ultimately do everything they can to enhance those benefits”.
Mr Moriarty took the example of an employee on €50,000 who has been paying into a scheme for 35 years. Despite the long service upon retirement, this person would only receive €8,500 from their corporate pension, supplemented by €12,500 from the state pension pot.
“While there has been much publicity around potential cuts in benefits for those in the traditional defined benefit pension schemes, those employees in defined contribution could face even greater pension adequacy issues; the key difference is that those in defined contribution schemes generally have far greater control over the size of their individual pension pot and the investment options,” he said.
Managing director of Irish Life Corporate Business, David Harney, said that the message to get to the public is that they need to invest in their pensions.
“At Irish Life, we believe the key factors affecting outcomes for defined contribution members revolve around starting early, putting in enough and investing appropriately. This won’t come as a surprise to people within the pensions industry but these are messages that the general public need to be familiar with,” he said.