Wednesday 12 December 2018

What a difference a decade makes...Irish workers advised to get a head start on pension

State pension currently stands at €12,651.60 annually Stock Image
State pension currently stands at €12,651.60 annually Stock Image
Louise Kelly

Louise Kelly

The average age of employees paying money into a company pension is now 37 as a "younger for longer" trend in Ireland emerges.

According to Irish Life's "Smarter Company Pensions" report, a typical Defined Contribution (DC) member earns a salary of €51,2501 and contributes 11.4pc of their salary to their pension, including the contribution from their employers.

The report looks at issues of coverage - the number of people with pension plans - and adequacy - the level of pension workers can expect based on the amount they are saving.

Irish Life has advised of the benefits of starting a pension a decade earlier, as it calculated the retirement outcome of a typical DC member (detailed above) would likely be €13,249.

This equals just more than a quarter of their salary, and would be topped up by the State pension, which currently stands at €12,651.60 annually.

"Within one generation we have seen some interesting societal changes," Tony Lawless, Managing Director, Irish Life Corporate Business, said.

Credit: Irish Life, 2018
Credit: Irish Life, 2018

"People are delaying big life decisions and enjoying their young-adult lives for longer. People are starting their DC pension at age 37 – which might still seem young. But when it comes to pensions, the earlier people start the better."

His comments reflect recent CSO data which indicates that, as a nation, we are making commitments such as marriage and having children later in life.

For example, while the average age of those getting married stood at 25 in 1977, three decades on, people are getting married at 35.

When it comes to pension contributions, however, Lawless said the benefits of starting a pension while still in your 20s is significant.

"The biggest challenge is making pensions more appealing; our research found that 29pc of people say they just never got around to starting a pension. People need help and encouragement to get started with pensions; being automatically enrolled into a pension by an employer or by the Government represents a big nudge.

"It removes the need to make a pension decision at an individual level, which turns pension inertia into a positive. Those who are auto-enrolled into a pension will see major benefits in the long run. Once people are signed up, it’s about helping them understand what level of pension they can expect at retirement and helping them to take control of that." 

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