Fewer than one in five workers eligible for the new pension auto-enrolment system believe it will deliver a sufficient income in retirement, according to a new survey.
Almost 770,000 workers were compulsorily signed up to the new auto-enrolment scheme on January 1st. It is designed to ensure all workers have a reasonable income in retirement rather than relying solely on the State pension.
The system, called My Future Fund, takes 1.5 per cent of a worker’s gross wage each month. A similar sum comes from the employer, with the State adding €1 for every €3 put in by the worker.
Those figures will rise gradually over the coming years so that workers will have 6 per cent of their wages taken from 2035.
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The deductions are made from the salary of all workers aged between 23 and 60 who earn more than €20,000 a year and who have no other pension payments deducted from their salary at source outside of PRSI.
However, from July 1st, a two-month window opens during which workers paying into the scheme can choose to opt out of the arrangement.
Eight in 10 workers eligible for auto-enrolment don’t think it, alone, will be enough to provide for their retirement, according to a survey from Ask Acorn, a nationwide network of financial intermediaries.
Of those, one in three believe their auto-enrolment pension alone will be “nowhere near enough”, the survey of 1,000 eligible workers nationwide found.
Ask Acorn chief executive Keith Butler said limits on the contributions that can be made into auto-enrolment mean there also limits on the extent to which the system alone can be relied upon to provide a sufficient income in retirement.
“This is borne out by the results of our survey, with the vast majority of those eligible for auto-enrolment feeling that My Future Fund alone would not be enough to provide for their retirement,” he said.
“This is encouraging as it shows that most Irish people understand the restrictions of auto-enrolment and are under no illusion about the retirement income that the scheme can deliver.”
He said auto-enrolment does not allow flexibility in contribution rates so neither employees nor employers can contribute more or less than these set percentages. Furthermore, employer and State contributions are capped at €80,000 of annual salary.
“If you want to save more than the auto-enrolment contribution limits, you cannot do so within auto-enrolment itself, but this doesn’t mean that auto-enrolment won’t work for you or help boost your income in retirement,” he said.
“For many workers with no company pension on the table, auto-enrolment can be a key part of their pension mix and something they can supplement with a personally-owned pension and the State pension, assuming the State pension will be still in operation when they retire.”
