Don't trust workers on pensions, warns expert
WORKERS are too ill-informed to take responsibility for their own pensions, a leading academic has claimed.
Professor Alan Barrett told a conference there was a need for the Government to be involved as the area was too complex for ordinary consumers.
Research conducted by the professor among 8,000 people found that a majority of workers aged between 50 and 64 who are enrolled in a pension were clueless when asked what amount of money their pension will pay out when they retire.
This is despite the fact that people in this age group are thought to be the best informed about retirement savings.
The academic based at Trinity College, Dublin, found a knowlege gap was a feature for those in both defined benefit and defined contribution schemes.
With a defined benefit scheme there is a promise to pay a pension based on the final salary and the number of years the member was in the scheme. The pension from a defined contribution scheme depends on the contributions and how the investments perform.
Prof Barrett said yesterday it was "potentially dangerous" to place responsibility for pensions on to individuals.
"The implications are important. People aged 50 and over, who are in pension schemes, should be the best informed on pension matters," he said.
"The lack of knowledge that we have uncovered may be the 'tip of the iceberg'. If that is the case, is it a good idea to increasingly place the responsibility for pension coverage on to private individuals?"
And women emerged as less informed about pensions than men, a conference organised by the Society of Actuaries in Ireland heard yesterday.
Those in the private sector were more inclined to tell the survey team they don't know much about pensions compared to those in the public sector.
More educated people tend to be better informed, the research, carried out as by Prof Barrett and part of the Irish Longitudinal Study on Ageing, found.
The Government should help people through the pensions maze, he said. But he admitted that the State does not have a great record when it comes to making decisions on pensions.
Over 8,000 people aged 50 and over were interviewed in 2010 and will be interviewed every two years until 2018, at least about their economic, social and health circumstances with a view to developing a clearer picture of the process of ageing in Ireland.
Social Protection Minister Joan Burton, who has responsibility for pensions policy, indicated to the conference that the Government was still looking at capping tax relief on pensions that deliver more than €60,000 a year.