We'll need to work longer in 'pensions timebomb'
Published 09/05/2014 | 02:30
WORKERS will have to take up part-time jobs after retirement to fund their lifestyles, a study has predicted.
Ireland is heading for a pensions timebomb, with senior citizens expected to have to stay in employment long after they have passed retirement age.
Pension expert Mercer has warned that radical measures to tackle the crisis need to be put in place by 2020 in order to safeguard the system long into the future.
Second careers will be more common by then, it said.
And few workers will be able to move from salary to pension in one go.
"One in five 30-somethings will be likely to see their 100th birthday and there will be only two workers for each person in retirement, compared to five workers for every pensioner today," said Tom Geraghty, Mercer's chief executive.
"This highlights the urgency for the Government to continue to push ahead with its planned introduction of auto-enrolment and ultimately mandatory pension saving."
Auto-enrolment would involve all workers being automatically enrolled into a pension scheme.
There are over half a million senior citizens in Ireland, all of whom are in receipt of a state pension. That figure is expected to soar to 750,000 by 2021, a million by 2031 and 1.5 million by 2040.
Niall O'Callaghan, head of defined contribution pensions with Mercer, said many people would have to supplement pensions. "By 2020, second careers and working beyond retirement age will be more commonplace," he warned.
He explained: "It will become rare for individuals to move from salary to pension in one go. Rather, it will be increasingly common for workers to reduce their hours in their 60s and 70s and to 'partially retire'."
The qualifying age for the state pension is to rise from 65 to 67 in 2021 and then to 68 in 2028 – a measure that has been described as "a step in the right direction" by industry chiefs.
Sean O'Donovan, head of DB risk at Mercer, urged the Government to make pension schemes mandatory in the workplace, especially for Generation Y.
A staggering 70pc of under-30s are not availing of matching employer contributions.
He warned that the state pension may not be as generous or as readily available in the future, even if inflation rises.
"If, in the future, the state pension isn't as good a support, or as generous as it has been for retirees, then people will need something else to fall back on and I think the Government needs to recognise that," he said. "Auto-enrolment shouldn't be seen as another tax, it should be seen as (people) protecting themselves."
Mercer's report, entitled 'Charting the Course to 2020', found that the State would increasingly struggle to afford the provision of a guaranteed pension for everyone.