Monday 10 December 2018

Your questions: How can I bridge 3-year ‘pension gap’?

Planning for retirement
Planning for retirement

Gavan Ryan

I’m 50-years-old and due to retire at the age of 65.

 I have a pension through my job which I have been contributing to, along with my boss. I was planning to add this pension to my State pension but have recently found out that I will not be entitled to the State pension until the age of 68. How can I prop up my income when I retire until the State pension kicks in?

Paul, Killarney, Co Kerry

Gavan Ryan replies: The State pension and other State payments make up over 63pc of the income of an average retired individual. You are lucky in that you are part of the 40pc of the population with a private pension and also that you are realising this change is happening — so you have some time to address this “gap” of three years.

This year, the State retirement age increased from 65 to 66 and by 2028, it will have increased to 68 — the age which will apply to you. Currently, the Government will pay a special jobseeker’s benefit to those turning 65 this year and this will be paid until their State pension starts at 66. It is unclear whether this will continue to apply to you but it is very doubtful.

The most important thing you need to do now is examine your anticipated cash requirements at the age of 65 and put a plan in place. In the absence of any other source of income, you may have to use your pension lump sum to bridge the gap somewhat. The pain of this can be lessened if you plan ahead.

If, like me, you believe that the government will increase the retirement age again, you need to put more of your own money into your pension while you are still working — and ensure that your money is invested wisely. You could also seek some additional work at the age of 65 until the State pension kicks in.


I am 42, self-employed and have recently received approval for a mortgage from my local bank. I spoke to one of their advisers about my mortgage protection insurance and he told me I should get illness cover. I have heard a lot of negatives about this and it seems expensive — do I really need it?

Louise, Raheny, Dublin 5

Gavan Ryan replies: It can be tricky talking to a bank’s adviser. They usually are not independent and often offer you a product from or linked to their own company— without researching the market on your behalf. Your mortgage protection insurance will only pay off your mortgage should you or your partner (if it is a joint mortgage) pass away.

As a self-employed individual, you will receive no support from the Government for time off should you fall ill. Some illness cover may therefore be worth your while.

There are two main choices — serious illness cover and income protection. Serious illness cover pays out a lump sum if you fall ill with one of a list of illnesses specified in the policy. There is no payout if the illness isn’t on this list.

Income protection pays you a partial replacement, taxable income if an illness or injury prevents you from doing your job. You will usually have to wait a few weeks after you fall ill before the cover kicks in. You get tax relief on your premiums.

Sometimes, a combination of both serious illness cover and income protection is worth considering, especially if you have little or no savings. It’s possible to keep the cost down but like car insurance, the true value of these policies is only truly felt at the claim stage.


Gavan Ryan is senior financial consultant at IFG Private Clients

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