Are you saving enough for the retirement you want?
Three times as many working-class as middle-class people said they don’t have a pension (27% versus 10%); most of those who don't start a private pension say they regret their inaction. Photo: iStock
Saving enough in your pension? If not, you’ll regret it. Almost half (48%) of pension holders wish they had started their pension earlier, while about one in five (19%) wish they had paid more into their pension sooner.
Overall, one in five Irish adults say they don’t have any pension, with women more likely to lack a pension than men. This is according to the results of a nationwide survey of 1,000 adults commissioned by insurance broker Gallagher in Ireland.
The research also suggests that financial literacy is a problem. Three in ten pension holders admitted that they didn’t recognise the importance of early contributions, while nearly one in five (18%) cited a lack of understanding of pensions as the reason for their delayed savings.
“Our research shines a light on the fact that there is a critical gap in Ireland’s retirement planning landscape,” says Jonathan Roche-Kelly of Gallagher in Ireland, “and many people lack awareness around the importance of pension contributions. The fundamental issue at play here is that too many people fail to grasp the long-term impact of delaying pension savings until it’s too late.”
More men than women wish they had paid more into their pension sooner (23% versus 16%), while three times as many working-class as middle-class people said they don’t have a pension (27% versus 10%).
Four in ten (41%) pension holders have no regrets around when they started their pension. Over one in four (27%) said they began their pension at the right time, while 14% said they started a pension as soon as it was financially feasible to do so.
“Starting a pension early is one of the shrewdest financial moves you’ll ever make,” says Mr Roche-Kelly. “Those who do not have a pension are at risk of finding retirement a real financial struggle, because without a private pension, they are likely to be completely reliant on the state pension in retirement.”
This currently stands at a maximum rate for those aged over seventy of €351.80 a week.
He points out that even contributing small amounts into a pension in the early part of your career can help build a significant pot at retirement – particularly when the benefits of compound investment growth are taken into account.
The survey also confirms a significant gender pensions gap in Ireland. The latest official figures show that a woman’s pension is on average 35% less than a man’s.
“Given that women in Ireland typically live longer than men,” says Mr Roche-Kelly, “and that there has been a substantial increase in recent years in the number of female retirees, the gender pension gap is hugely concerning.”
When it comes down to why we’re not saving as much as we should be, the answers are not hard to find.
Another recent survey undertaken by Independent Trustee Company (ITC) found that lack of knowledge/awareness of pensions is the main reason why people aren’t saving enough, followed closely by inflationary pressures.
Six in ten financial advisors cited high costs such as grocery and childcare bills as one of the top reasons why people are not saving enough into their pension today.
Three in ten (30%) advisors cite unaffordable housing, with almost one in five (17%) citing unaffordable rents. A lack of interest in pensions as well as poor money management skills are also at play, with almost three in ten advisors citing either of these factors as obstacles to pension saving.
Almost one in four (22%) advisers said that low income is a key reason people aren’t saving enough for their retirement.
“Ireland is the second most expensive country in the EU,” says Glenn Gaughran of the ITC, “with prices for basic goods and services a staggering 42% above the EU average, according to a recent Eurostat report.”
He points out that Ireland experienced record price growth in 2022 and 2023, with inflation surpassing 9% on a number of occasions.
“Let’s not forget too that above-average inflation has been recorded for many basic grocery items, with butter prices up over 16% over the last year, milk prices up between 12% and 14%, and beef prices up 13%.”
Mr Gaughran believes that unless more is done by the Government to tackle Ireland’s high living costs so that people can save adequately for their retirement, many simply won’t have a comfortable or even basic standard of living when they retire.
“The lack of knowledge or awareness of pensions is also an issue and needs to be tackled head on, particularly as life expectancy in Ireland continues to increase. The message of why it’s so important to save adequately into your pension – and the consequences that people will face otherwise – simply needs to be communicated in a way which hits home to Irish people.”
In the case of pensions and retirement, ignorance simply is not bliss. Many of us will get a big financial shock in retirement if we don’t have enough money to retire on.
“One third of workers have no pension coverage outside the State pension. It is imperative that private pension coverage in Ireland is improved – otherwise, a significant portion of the population could struggle financially when they reach retirement. But as important as it is for people to save into their own work or private pension, it’s equally important that they save enough into one.”
Mr Gaughran notes that as we go through life, there will always be financial priorities which trump others – whether that be saving for a deposit on a house, affording the rent, bringing up a family or even travelling.
“But it is important that this is not done at the expense of building up, or saving adequately into a pension. It makes a lot of financial sense to save into a pension from a young age – even if in small amounts at the outset as this can ultimately be improved on. Waiting until near retirement to address a gap in pension savings will simply too late.”
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