Conference warned on pension contributions

WORKERS NEED to more than double contributions to defined contribution pension schemes if they plan to retire on half-salary, a conference heard yesterday.

Research conducted by the UCD Michael Smurfit Graduate Business School found the average contribution by employees in defined contribution schemes was just 6 per cent of gross salary. This figure was, on average, matched by employers, giving a total of 12 per cent.

However, Rachael Ingle, of benefits consultants Hewitt Associates and chairwoman of the Irish Association of Pensions Funds (IAPF), told delegates at the industry's first conference dedicated to the defined contribution pension that this was considerably below the figure required.

"A 35-year-old starting a pension today would need contributions of 25 per cent to ensure an income of 50 per cent of salary at age 65 in addition to the State pension," she said.

Defined contribution schemes pay a pension that is determined by the level of contributions and the investment performance of those contributions over time. The more traditional defined benefit model pays a guaranteed pension based on length of service.

Jerry Moriarty, director of policy at the IAPF, said membership of occupational defined contribution schemes had jumped 87 per cent since 1999 to 270,000. If the self-employed and those holding Personal Retirement Savings Accounts are included, he said it was estimated that 650,000 people were reliant on defined contribution schemes.

Irish Life Investment Managers chief investment officer Kieran Bristow urged delegates not to worry about the "negative" stock market situation.