Reliance on State pensions ill-judged

People who rely on the State and their employers as the main provider of pensions are likely to be disappointed, according to an employee benefits expert.

Writing in Coyle Hamilton's Commentary 2001, Mr Kieran Kelly said long-term financial independence in the future would require a more multi-faceted plan for the creation of wealth than the traditional model.

"As the shift in responsibility moves from the employer to the employees, they must realise the value of saving and investing for the creation of long-term wealth to secure their financial independence during the later quarter of their lives."

Mr Kelly said securing personal wealth in the future will involve various methods on investment and savings:

Personal contributions to company pension plan;

Additional Voluntary Contributions;

Personal Retirement Savings Accounts;

Mutual funds;

Stock market investment;

Employer Share Schemes;

Property.

The percentage of employees included in company pension plans has fallen to below 50 per cent, despite the increase in the size of the workforce.

Mr Kelly predicts that with increasing employee mobility it is likely that employer schemes will represent an even smaller proportion of retirement provision. He said the individual should recognise this threat early on and create an effective personal financial plan.

So what can you do now? Mr Kelly said employees should ask themselves the following questions:

When do I wish to give up full-time employment?;

What level of income or wealth do I wish to secure?;

How do I assess the financial commitment to achieve these objectives?;

What investment strategy should I pursue to create the best balance between maximising investment returns and long-term security?