Workers set to face pensions shock, warns watchdog
Thousands of workers face a pension shock after a new report revealed staff on €50,000 salaries will struggle on a pension of just €8,500 a year in retirement.
The survey of more than 6,000 defined contribution pension schemes reveals the average contribution being paid into a pension is worth 11pc of a worker's yearly salary.
A total of 5.4pc of this amount is paid by employees, and 5.7pc by employers.
But the returns on this contribution are unlikely to leave staff with anything approaching a life of luxury when they retire.
The Irish Association of Pension Funds, a non-profit organisation representing pension savers, said the typical worker retiring on a salary of €50,000-a-year, who joined the scheme at 35 and contributed for 30 years, would end up with just €8,500 a year.
Chief executive Jerry Moriarty said this annual payment was "probably far less than they were hoping for", although they would get another €12,000 a year if they qualified for the state pension.
Data shows if they join when they are 30, they will get 20pc of their final pay, 17pc if they join at age 35, and 13pc if they join at 40. But the value of the pension drops to just 10pc of final pay if they sign up at 45 and just 7pc of their final salary if they start paying into a scheme at the age of 50.
Mr Moriarty said there had been a lot of publicity around potential cuts in benefits for those in traditional defined benefit pension schemes.
However, he said those in defined contribution schemes could face even greater "pension adequacy issues".
The survey also reveals that over half of employers in small schemes contribute less than 5pc, which Mr Moriarty described as "wholly insufficient".