Pensions bodies in Ireland have expressed concern about changes to savings rules recently announced by the Irish Minister of Finance, fearing pensioners could find themselves penniless at retirement and that employees could be exposed to a pensions mis-selling scandal similar to that of the UK.
The proposals will allow Irish citizens to cash in their pension savings balance if they have a guaranteed income for life of at least IR£10,000pa (E12,697) (including the state pension) or to invest the cash in an approved retirement fund (ARF), which can be drawn at a retirees discretion. The same rules apply to people with incomes of less than IR£10,000 pa, except that a minimum amount of IR£50,000 must be invested in annuity or an approved minimum retirement fund (AMRF).
Income earned within an AMRF can only be drawn providing its value does not drop below the IR£50,000 platform, and along with ARF money will be taxed at the person’s marginal rate.
However, the Irish Association of Pension Funds fears people may feel pressurised, through mis-sold financial products or family necessities, to cash in large proportions of their pension savings at retirement. And they are concerned that in the event of pensioners living to a very old age retirement assets could dwindle severely.
Paul Flaherty, chairman of the IAPF, says: “We welcome flexibility but not at the expense of security, and the government proposals are offering an incentive for financial advisers to mis-sell retirement products. And we believe this could pose an impossible dilemma for ordinary people on whether they spend their pensions savings during their lifetime, or having made sacrifices all their lives survive on a lower income to leave money to their families.”