mast image

Special Report

Impact investing

Sections

Time for Ireland to take steps to avoid a future pension shock

Recent statistics suggest that Ireland is less immediately threatened by the demographic time bomb than some larger economies. A younger population means our dependency ratios will not go critical until years after many of our European partners. In the words of the proverbial Irish optimist: “it could be worse”. But it could be a lot better.
Without widespread private share ownership or a tradition of substantial savings, the fact is that most of my generation will be relying on the state and private pensions for our standard of living in retirement.
Another fact is that only half of the workforce have any formal pension provision in place. The other half may have sufficient private wealth, which is highly unlikely, or be depending on social welfare for their financial security, which is depressing.
Even among the fortunate half, who are members of company pension schemes or have made personal provision, there are serious question marks about the adequacy of the prospective benefits. Members of defined benefit plans who remain in a single employment throughout their careers are probably secure enough. A typical final salary plan promises an income replacement of a half to two thirds of salary to the long server. But even this bastion is under threat from the reality of insolvency resulting from a few years’ negative investment returns.
People who have had chequered careers, switching jobs or moving in and out of the workplace can expect to fare less well. Defined contribution schemes, where combined employer and employee contributions average only about 10% of salary, are demonstrably insufficient; unless you started work at 15 and sustain the effort until you are at least 65.
So is it all gloom and doom? Not necessarily. As I have said, we have the luxury of a little more time than most of our neighbours – as long as we don’t waste it. The government has undertaken a number of initiatives in recent years.
qThe National Pensions Reserve Fund, designed to meet some of the cost of public sector pensions from the year 2025 onwards.
q Personal Retirement Savings Accounts (PRSAs), easy to understand and a relatively cheap means of saving for ones own retirement.
q Compulsory access, where an employer must offer employees either an occupational pension scheme or PRSA.
qTax relief on individual contributions, based on age, up to 30% of income.
q Easier access to funds after retirement, allowing draw down of money in place of annuities in certain circumstances.
q Pension Awareness Campaign, consisting of advertisements and events to alert people to the need for retirement provision.
My own belief is that people will take responsibility for their own destinies, if only they are given enough information to make the necessary decisions.
We may be further away from our own demographic tsunami than some others, but when and if it hits, it will hit us with just as much force. We have the foreknowledge and we have the resources to avoid disaster. All we need now is the intent.

Stephen Lalor is senior pensions consultant with Coyle Hamilton Willis in Dublin, part of the ASINTA Network

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<