900,000 workers will retire without a private pension, warns new study
Published 29/09/2015 | 02:30
Almost 900,000 people will have to rely on the State pension when they retire because they have no private retirement fund in place, new research shows.
The new information comes just weeks ahead of the Budget when the levy on private pensions is expected to be removed.
There has been no rise in the numbers with a pension since the financial crash, a new report by Friends First says.
The failure of more people to start a pension comes despite the survey showing two out of five households are seeing an improvement in their finances.
This is due to higher wages and to an increase in working hours.
Just 46pc of adults have a pension, the study, seen by the Irish Independent, shows.
People with no private pension will end up depending on the €230-a-week State pensions when they stop working.
However, there are indications from the survey that more of those in the 25 to 34 age bracket own a pension.
For those who do have a pension, the trend for reducing contributions appears to have ceased, with a modest increase in premiums by almost 20pc of this group.
Simon Hoffman, the director of pensions and investments at Friends First, said the postponement of financial planning for the future was still a concern.
"We have an aging population and the number set to rely on the State pension as their sole retirement around the 890,000 mark," he said.
He said that although it was better to start a pension early, it was never too late to start making provisions for a comfortable retirement.
He added that improving economic circumstances should mean pension affordability should become less of a barrier.
But if the numbers without private pensions doesn't fall, it will put a huge strain on the State in the coming years. Such people may struggle financially in their retirement and will be depending on a pension that is less than the current minimum wage.
The move to end the levy on private pensions at the end of this year may make pension savings slightly more attractive.
A total of €743m was taken from private-sector pension funds in 2014 as a result of the levy.
This brings the total raised from the levy in the last four years to €2,224bn.
It continues to be imposed this year, despite the Government originally saying the levy would cease at the end of 2014.
However, the rate that it is to be imposed on the assets of schemes fell to 0.15pc this year.
Minister for Finance Michael Noonan promised in the last Budget that it would now end this December.
The Government introduced the levy to fund job creation. It is charged on the value of pension assets.
There has been wide-ranging criticism of the levy, which was described as "theft" by various groups.
It affects around 750,000 people who have defined contribution, defined benefit, additional voluntary contribution and self-employed pensions. Those affected include workers paying into a pension and those in receipt of a pension.