It’s Pensions Awareness Week once again and in a similar vein to last year the pensions landscape, though improving, is still far behind where it should be in terms of usage and wide-scale uptake across Ireland. There is a combination of reasons for this ranging from concerns about a lack of affordability, to personal convictions towards allocation of income as well as the view that ‘it is too late’ to start. Whatever the reason there appears to be a genuine lack of awareness about pensions on the whole and how they operate to name a few.
I don’t have a Pension. (But You will)
You are not alone. At present 35% of employees in Ireland aged between 20 and 69 do not have a pension. The government, however, has stated that they will implement an auto-enrolment scheme in 2022 so pension awareness is something that will be highly topical over the coming decade and beyond. This being said, following the impact of Covid on the public finances it remains to be seen how it will form part of next month’s State Budget plans considering that pensions have been a ticking timebomb for the last 20 years.
Many people assume, erroneously, that they will get by on the Old Age Pension when they retire but this would be naïve for a number of reasons. Statistically, even if in receipt of the State Retirement Pension 1 in 10 people (10.5%) are still at risk of poverty. While life expectancy has improved over the last decade, the risk of poverty has increased as this figure stood at 9.6% in 2009. Over 75% of older people in Ireland currently rely on the State Pension as their main source of income but this will no longer be the case over the coming decades.
In the past Irish families were larger and there was always a ratio of 5-7 taxpayers for every one old age pension recipient. This however has been changing over the last number of decades and at present there are four income taxpayers for every one recipient which will lower to a ratio of two to one over the same period by 2050. Taking these statistics into account it quickly becomes clear that there is an urgent need to ‘self fund’ and supplement your own shortfall in income upon retirement rather than depend on a diminishing or potentially withdrawn Government funded pension.
I’ll think about it when I’m older
Having a pension in retirement should be given the same priority as consideration for access to medical care as it ensures that everyone has a sufficient retirement income allowing them to grow older with dignity and finance those dependencies as they age. There is also the issue of living longer. A 65 year old in 2020 for example will live 50% longer in retirement than a 65 year old retiring in 1970, so more income will be needed over a longer lifespan than during the age of our parents. At present half of the private sector have an average pension pot of €6,000 which is not enough to live on so change needs to be made and the best time to make it is today rather than putting it off until we are too old to make up the difference.
I have a Pension so I’m fine, right?
Only if you are fully aware of how to maximise that pension through a combination of contributions, making optimal fund choices over the span of the pension(s) suited for your retirement goals and that you are taking full advantage of the tax reliefs available to you on an annual basis. A Certified Financial Planner is ideally positioned to provide such advice and ensure you keep focused on these measures to realise these benefits for you and your family so engage with your Planner regularly (if you have one) to obtain assurance than this is the case.
The pension experts
At Aspire Wealth Management we have been providing pension advice for over 30 years and have many a satisfied client who can attest that our service is second to none. If you or anyone that you know would like to get fully pension aware and start a pension or review an existing pension(s) to have peace of mind, call us on 01- 8455827 today or schedule a call back or Zoom meeting on us through our website www.aspire-wealth.com
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