Pensions report: 50 years’ work to get 50% of salary

A 25-YEAR-OLD starting a pension today will have to work for 50 years just to guarantee half of their current salary on retirement.

The stark figures are based on a defined contribution pension of 10% of monthly income on a salary of €50,000, factoring in wage inflation of 4% a year.

The head of the Irish Association of Pension Funds, Patrick Burke, said the statistics should again make people aware of the adequacy of current pension contributions.

He said the solution to the pension crisis needs to be an SSIA-type pension scheme. According to research by the association, four out of five people with no pension would start one under an SSIA-type structure.

Last year, defined contribution pension scheme membership exceeded defined benefit membership for the first time in the private sector.

In the case of defined benefit, employees are assured a pension at retirement equivalent to a certain proportion of final salary, often two-thirds. In the case of a defined contribution scheme, the risk rests with the employee.

Mr Burke said while participation rates and contribution levels to defined contribution arrangements have been improving, contributions levels in most cases are substantially less than the levels required to secure an adequate income in retirement.

Governor of the Central Bank John Hurley said nearly half of Irish workers are not covered by occupational or private pension schemes. “As a result, these workers face a substantial fall in living standards when they reach retirement.”