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Retirement.....are you prepared?

The cost of buying a pension has shot up by 40% in the last three years. So much so that a male worker now needs €200,000 to get an annual pension of €10,000. Ten years ago €140,000 would get you an annual pension of €10,000.

Furthermore the number of people contributing to occupational pensions in Ireland is falling, with over half of Ireland's workforce now without a pension, according to recent research. Some 51% had no pension, with females and young people least likely to have one. A separate survey by the Central Statistics Office (CSO) last year indicated a drop in private held pensions by self-employed workers from 47% to 36%.

With the age at which people can receive the old age (State) pension set to rise to 68, putting a plan in place is vital! However, set against the backdrop of falling incomes and increasing taxes, funding for retirement is more of a challenge. Another obstacle is the poor performance of funds in recent years and the Government decision to impose a 0.6% levy on pensions hasn't helped matters.

 More research, however, has indicated cuts of up to 50% to the real value of the State's old-age pension are inevitable! The Department of Social Protection is currently awaiting the publication of an OECD (Organisation for Economic Co-operation and Development) review of Irish State pensions. The department plans to base its future pensions policy around the report.

However a more sinister reality is that we raided the National Pensions Reserve Fund to recapitalise the banks with further contributions to the fund being suspended in the face of a large deficit on the Governments budget. This has the impact of today's and tomorrow's workers having to work longer before retiring and having smaller public pensions.

Simply speaking if things don't change in Ireland by 2060, when today's graduates retire, the gap between the amount being paid into national pensions and paid out would be equivalent of 10% of GDP according to the OECD.

With this backdrop private pension funding becomes even more important to fill the gap in public pension funds (State Old-Age Pension). Even if further increases in retirement ages are implemented, private pension provision should be promoted to allow workers draw on their savings in old age, complimenting their working income and public pension benefits. Making private pensions compulsory would be the ideal solution to eliminate the pension gap and ensure benefit adequacy.

Incentivise people to save for their retirement!!

If you are serious about your future contact Alasdair today on 01 810 1912 or email he will be happy to help by carrying out a FREE Financial Review.


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