Monday 24 October 2016

Pensioner poverty a real threat as 300,000 set to retire

Published 16/08/2016 | 02:30

Social Protection Minister Leo Varadkar Photo: Tom Burke
Social Protection Minister Leo Varadkar Photo: Tom Burke

The prospect of pensioner poverty is staring us in the face. Few of us fancy living on €8.50 a day. But that is set to be the reality for many as they have so little in their pension pots that they can expect an annual income from their fund of just over €3,000.

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This is because the average amount people have saved into their fund is just €80,000.

This will give an annual income to a 65-year-old of €3,100, based on a single life annuity with a five-year guarantee, according to Standard Life.

The figures exclude the State contributory pension, which is around €12,000 a year.

A retirement income as low as €3,100 a year would hardly fund two pints of beer a day, never mind that new car you have promised yourself when you give up work. The pity of the situation is that most of us are deluding ourselves into thinking that the little we are putting into our supplementary retirement fund will give us a fine time in our golden years.

Almost half of people want to retire in the sun or by the sea, Standard Life found.

There is nothing wrong with people dreaming about a comfortable retirement involving sitting on the deck of a villa, overlooking the sea.

But with so little being saved the reality is set to be rather different.

This means that there is some cognitive dissonance at play among workers.

And the stark figures showing how little people have in their retirement funds have to be considered in the context of the huge numbers of people who have no supplementary pension at all.

Six out of 10 people in the private sector have nothing in place and are relying on the State pension to fund their old age.

But there are major questions about the sustainability of the State contributory pension. It is funded on a pay-as-you-go basis from current taxation.

And the number of people in Ireland aged 65 and over will increase by almost 300,000 over the next 10 years - from 570,000 in 2013 to 855,000 in 2026.

By 2055, just two people will be working to support every pensioner, down from about five today.

Successive governments, and the latest one is no different, are utterly failing to get to grips with the ticking pensions time bomb.

Social Protection Minister Leo Varadkar is the latest Cabinet member to flunk taking action.

Three years ago, the Organisation for Economic Co-operation and Development recommended a mandatory or an auto-enrolment scheme for workers as the best way to expand pension coverage.

Mr Varadkar said recently he favours auto-enrolment. But this, he said, could take up to 10 years.

We need to act far more urgently than that.

Irish Independent

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