Pension ignorance a major concern, says ESRI
They are supposed to be the "best informed" in society when it comes to pensions, but two-thirds of those over 50 years of age paying into a private scheme are unable to provide basic information about their future entitlements, a new study has found.
The survey, undertaken by The Economic and Social Research Institute (ESRI) and Trinity College Dublin, set out to examine how well informed people are about their pension benefits. As part of the study, people who are still working were asked if they are members of private or public pension schemes.
However, the vast majority of those questioned had little clue of what they were paying into. Members of private and public schemes could also not answer questions in relation to how they will be paid when they reach retirement age.
Over 60pc of participants were unaware if they would receive their pension entitlements in a lump sum or monthly instalments.
A further 55pc of people did not know the amount that they would be paid on retirement.
While uncertainty over pension payments may be expected in defined contribution schemes, the study found that half of people paying into defined benefit or final salary schemes were also unable to say what percentage of their salary they would receive.
Under defined benefit schemes, the retirement income is determined by salary at retirement and the number of years served, making it straightforward to determine payment.
The study's author, Alan Barrett, has said such low levels of information are "a source of concern", especially as the nation's population continues to age.
"There is a simple way around this and that is through the provision of information," he said.
"The people questioned for this study are likely to be among the best-informed people in the population on the subject and they still know very little. If this study was replicated for other groups, the lack of knowledge would probably be greater."
"It is an issue that needs addressing and there are three ways around that.
"The first is something as simple as mandatory workplace lectures and public information campaigns. If this fails, the question arises as to whether some form of mandatory contributions may be required," he added.
Mr Barrett said that a case may be made for compulsory pension schemes.
"The Government may have to force people into pensions, as harsh as that sounds," he said.
"It could be argued that this is already the case with PRSI, but this could be developed into a better mandatory pension programme.
"Another avenue worth exploring would be auto-enrolment systems when a person starts a new job, accompanied with an information event," he added.
Economist Jim Power echoed Mr Barrett's words and stressed that the PRSI system has actually made matters worse.
"The results of this study are no surprise to me. The concept of a pension is a very simple thing, you save for later life," he said.
"But overcomplicated and incomprehensible legislation turns people off and makes them bury their heads in the sand. This is the industry's fault, there is a simple solution and that is simpler legislation."
The study also found that men are better informed than women.
Some 53pc of men did not know the amount they would be paid, but this rises to 60pc for women.
Meanwhile, "better educated people" were found to be more informed when it comes to entitlements.