“Both the State and the individual have a responsibility for ensuring that they are provided for in their later years,” says An Taoiseach Leo Varadkar
Many commentators have been suggesting for years that Ireland is facing a 'ticking timebomb' when it comes to pensions.
As the latest Census shows us, despite having an aging population (there are now 296,837 males and 340,730 females aged 65 or older in Ireland), CSO data indicates that by Q4 2015 just 47% of all workers aged between 20 and 69 years had a pension (occupational pension, personal pension or both).
This figure indicates that more and more people are going to end up relying on the State pension in retirement. In the future this will result in an increased burden on the State – a burden the State are unlikely to have the financial capacity to accommodate.
As a result, many private sector workers in particular could experience a massive financial shock at retirement.
As An Taoiseach Leo Varadkar put it recently; “The rate of supplementary pension coverage in Ireland is estimated at only 35% of the working population when the private sector is considered in isolation. If measures are not taken to ameliorate this low rate of coverage, many future retirees will suffer potentially significant unwanted reductions in their living standards on reaching retirement.
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“Despite considerable efforts over many years to incentivise voluntary pension participation, the purely voluntary approach is not achieving the desired goal of increasing coverage. Therefore, it is my intention to bring forward proposals for an auto-enrolment retirement savings system.”
Despite the fact that Ireland has a worryingly low level of pension coverage, a recent PAYE taxpayer survey of 800 taxpayers by Taxback.com revealed that the vast majority (84%) of people would be in favour of an auto-enrolment type scheme.
The survey had asked taxpayers throughout the country their view on State supported retirement savings schemes, similar to what is currently in operation in Australia.
Though, there would undoubtedly be some issues to iron out regarding contribution rates, the results indicate that there would be widespread acceptance of a compulsory pension savings scheme in Ireland. The CSO pension report found that 22% of respondents said the reason they don’t have a pension is because they hadn’t gotten around to it. The establishment of a superannuation type scheme could overcome the issue of inaction immediately.
Mr Varadkar believes that both the State and the individual have a responsibility for ensuring that they are provided for in their later years. This “essentially means that more people need a private pension.
“If you look to Australia you will see how they have addressed similar issues - they have had various forms of compulsory pensions in the form of superannuation schemes in place for decades - meaning that today approximately 71% of people over 15, and 85% of people in the 25 to 54 year age groups have pension coverage, he said.”