A third of workers plan to rely solely on state pension
A THIRD of workers are set to rely solely on the state pension to fund their retirement.
And large numbers have no idea how they will end up funding the cost of living when they give up work, a survey carried out by Amarach Research for SmartQuotes.ie shows.
The state pension is currently €230 a week, which works out at under €12,000 a year. It has not been cut during the past four years of the downturn.
The survey, conducted among 1,000 adults, found that four out of 10 people plan to use a combination of the state contributory pension and a private retirement income.
Just 6pc of people are aiming to rely on their property portfolios to fund their retirement, according to the research.
Andrew Nevin of SmartQuotes.ie said that the number of people relying solely on the state pension to fund their retirements would place huge strain on the Exchequer down the line.
"We know that the number of private pension plans has been dropping in recent years, largely as a result of job losses and the recession -- but it is critical that people choose to invest in a pension plan to secure their long-term financial futures and avoid relying solely on the state pension," he said.
When asked whether they have a private pension plan, two in five adults said they did. Men, the over 55s and the higher social classes were most likely to put money aside for their futures, according to the survey.
The survey shows that three-quarters of people do not know how much they are paying in annual pension charges and just one in 10 shop around for pension products.
A 30-year-old starting their pension with a monthly instalment of €300 after tax relief, and increasing contributions at 3pc each year, can expect to have a pension pot of about €726,000 by age 65, assuming net 4.5pc growth.
If the annual charges increase by even 0.5pc, the value of the fund at retirement reduces to about €664,000 -- a drop of over 8.5pc, said SmartQuotes.ie.
The number of active members in occupational pension schemes is 771,878 -- a drop of 38,083 over 2010 levels, according to recent figures published by the Pensions Board.
Meanwhile, defined benefit pension schemes continue to suffer from record low bond yields, according to consulting firm Aon Hewitt.
Core eurozone bond yields fell over July despite Moody's issuing negative outlooks for the credit ratings of the eurozone's AAA rated countries Germany, the Netherlands and Luxembourg.
Core countries continue to benefit as investors seek to avoid the increasingly risky peripherals.
Denis Lyons of Aon said assets gains over July were not enough to alleviate the stress put on funding levels by lower bond yields and many schemes will have seen a decrease in their funding levels as a result.