Anne-Marie Walsh: This timebomb threatens State and workers
Published 19/07/2016 | 02:30
It's a worrying statistic. About 60pc of private sector workers do not have pensions and the problem is even worse among the lower-paid.
Ireland is one of only two OECD countries without some form of mandatory supplementary pensions cover.
Social Protection Minister Leo Varadkar's predecessor Joan Burton brought the issue to the fore when she set up a working group on the introduction of a supplementary workplace retirement saving scheme last year.
Now her successor has taken up the mantle. He says the plan is a top priority. Something needs to be done to stave off an inevitable crisis in the state finances as the population ages and citizens live longer. There are 17,000 additional pensioners getting the State pension each year.
The population of over-65s, which stood at 11pc in 2010, is set to rise to 15pc in 2020 and 24pc in 2060.
Mr Varadkar's proposition may appeal to workers who just haven't bothered to put something aside for their golden years and are confused by the complexity of retirement options.
But it may not be as popular with those who are barely making a living wage. They will need incentives to prioritise their future financial security above the demands of the here and now. These could include a decent employers' contribution and a supportive tax-incentive regime.
Workers will automatically become members of the scheme under the plan. But if there is an opt-out clause, it will have to be attractive for them to stay on board or the Government will be back to square one.
If this happens, the OECD estimates that the future retirement income of retirees without supplementary pensions will be 17pc below the average of retirees with combined state and supplementary pensions in other member states.
In the meantime, pension experts recommend that you aim for roughly half your current salary as a pension.
For example, a 35-year-old on €36,000 a year would need to contribute €357 per month to have an €18,000 annual income in retirement. Five years later, they need a contribution of €441 a month for the same pension.
One way to reassess your priorities is to put your stats into the Pensions' Authority's online calculator.
By the time this Government, or the next, gets its act together on this scheme, you could find the basic goal of a half-a-wage pension already well beyond your budget.