Two young professionals air views on pensions
Pension affordability may dissuade one young professional from making an early start on saving for retirement.
One of the enduring cultural artefacts that will remain when the Irish Generation Zs are cashing (or perhaps not cashing) in their pension pots will be the liberties they have taken with the English language, and they don’t seem remotely soz about it at all.
Which makes it surprising that the word ‘pensions’ has escaped unscathed, for now at least anyway. But given their stifled yawn and bored countenance among many when the topic is raised, surely ‘pensionszzzzzzzzz’ can’t be too far away in the future.
Prevailing attitudes might soon be about to change. The upcoming introduction of auto-enrolment is a paradigm shift to the investment and money management norms in Ireland, and people who might have previously been ‘pension averse’ will be forced to sit up and take notice. Even the Gen Zs.
The Examiner spoke with two representatives of this younger cohort, both nearer to the starting stalls than the winning post in their career trajectories, on their engagement with the issue of pension planning and the factors that inform their decision-making.
Following a bachelor’s degree in law and political science at the University of Galway, Feda Murphy followed up with a master’s in American politics and foreign policy at the Clinton Institute at UCD and then a second one in War Studies at King's College London.
Feda has worked in political and security analysis roles, including a spell in the venerable halls of the House of Lords. He currently works for an international policy think tank, remotely, from his parents’ home in West Galway.
Following college, Tipperary native Kieran (31) made his way to KPMG and qualified as a chartered accountant. Living in Dublin, he now works as a Financial Manager for a leading international leasing finance enterprise.
Kieran has recently set up a private pension fund, a step that still lies in Feda’s future.
My Dad never had an interest in pensions as such, but he had his own business and had a great interest in economics, and he would have invested on a personal basis. Mam was a civil servant, so to a large extent, it was what it was for her; she had no control over it.
When I started, I wasn’t on much money and my first employer had no ‘matching’ contribution scheme, so you were all on your own, and to take out ten or five or even two per cent of that wasn’t on at the time. It was only later on that a close friend convinced me to start a pension, and then you get used to it being dripped out, and you don’t notice it. My current employer is really supportive of pensions and has a generous matching scheme.
Pensions were definitely discussed as we were growing up, which is not surprising because Dad is in the financial services industry and Mam is a teacher. But we never had exact plans. It was more about setting the mindset. The thing that comes to my mind when I hear the word ‘pension’ is sustainability.
The issue of family formation among dropping birthrates is troubling, the difficulty young people have in getting on the housing ladder. I worry about the government-backed system and how long it can last. How sustainable is this, and will there be enough money to distribute?
My friend groups wouldn’t be usual, as they would have done finance at college, or I might have met them in KPMG, and they would be quite focused, whether it is saving or investing. It would be on our agenda, from the tax relief to the opportunity for compound growth.
With the tax relief, say I pay in 5%, and my firm matches it, with the tax relief, I’m getting a 10% gain for a 3%contribution. If you thought you’d make that return at Leopardstown racecourse, you’d be all over it.
Yes and no, depending on their employment and income situation. It always comes back to pension affordability. Affordability when you’re younger is hard, and it takes a lot more time to set yourself up. You have time to think long-term about how best to invest in yourself.
Urbanisation is continuing, and rent is high in Dublin, so the extra income you are making with a higher-paying role there is being eaten up by rent. Then you have people who have checked out of the conventional ‘investment’ systems.
Online gambling has increased enormously, and people are getting into crypto more and more for investments, and many in my age group are thinking that this is a better long-term strategy. They are actually betting on their futures rather than going the traditional route through pensions.
Lack of awareness and knowledge on (a) availability, (b) how they operate and (c) their importance. In the case of pensions and investments, time is your best friend, and they are probably thinking it’s something that they’ll get around to when they’re older and when they have more money. I think the state pension can be a bit of a distraction in this respect. It’s not really enough, even if you are debt and mortgage-free.
Besides, all over Europe, you can see that the pensionable age is being pushed higher and higher, and you could be in the grave before you get it. I know some individuals whose parents have said that they don’t need to worry about a pension because when the time comes, they’ll be covered by a property inheritance. You don’t want to be waiting around; with a private pension, you can cash in when you’re fifty.
Just getting things off the ground. Job searches are increasingly mediated by AI algorithms, and this is impacting the ability to find better roles. It is taking much longer than previous generations to find your key well-paid role. And again, there is obviously affordability.
The cost of housing, like everything else these days, impacts the cost of living. The information is all there; it’s easy to get, but some would obviously ask, ‘What’s the point’ in an affordability crisis.
I’d do something simple, maybe like they do in Australia. If you work in Australia, you get your superannuation paid and although you could say it’s a bit like our PRSI, here you can go into your account, monitor the growth, and manage the investment.
You can elect to have it in cash, in bonds, in equities, in property, whatever. Even here with auto-enrolment, it all goes into a pot, maybe a pothole, and you hope it’s there in the future. In Australia, it is set aside, and your name is on it.
Liaising with the schools would be a good way to go. Engage with kids earlier and show them the benefits of putting money aside, even if it’s something quite small. Then, maybe around the transition year, the state could grant them a couple of hundred euros that goes into a pension-type account that they have control over.
The fact that it’s there, you have ownership of it, you can control it, would help bring pensions to the front of their minds for when they enter the workforce later on in life.
I don’t see anything like 2008 happening again. Regulation has tightened things down with the banks. I’m fortunate to have a good job, but the rising cost of living is a concern and the knock-on effects of that and how it impacts the sustainability of things.
Again, I think it all comes down to the housing issue. Whether I’ve been able to engage in the market. It would be more of an anxiety than a fear, a sense of having a ‘home’ as much as having somewhere to live. It comes down to relationship building, family formation and housing.
Concerns about how the affordability crisis impacts those things make thinking about the financial future quite difficult.
