Employers urged to help staff save for retirement

New report warns that most employees don’t put enough money aside for their old age

 

Employers need to do more to assist staff in saving for retirement, according to a new study published on Friday.

The ‘Retirement Readiness’ report from Irish Life, which reviewed close to 1,4000 defined contribution schemes covering 38,000 members, shows that the average age at which someone starts a pension plan is 37 years. The average contribution from both employer and employee is 10.3 per cent of salary.

The report warns that this level of contribution is insufficient with individuals likely to receive a pension of just€7,900 per year, equivalent to just 17 per cent of their salary.

Irish Life Corporate Business managing director David Harney said that while employees would also be able to avail of the State pension in retirement, it would still represent a significant drop in income for most people.

The study also reveals significant differences between genders when it comes to saving for pensions with the average defined contributed fund accumulated to date at just over €53,000 for males compared to just over €34,000, or 35 per less, for females.

Mr Harney said employers should examine ways of encouraging greater engagement from their employees in their Defined Contribution schemes.

“Implementing an auto-enrolment system where staff members are automatically included in their company pension scheme unless they opt-out is one way of improving the number of employees who join a company’s schemes. Employers matching employee contributions up to certain levels and automatic-increase mechanisms, where employees sign-up now for an automatic increase in their pension contributions at a later date, would also help members to achieve greater financial stability in retirement.”

“Our analysis also highlighted how important it is for people join pension schemes as early as possible. The current average joining age of 37 years does not give people the optimum amount of time to build their fund. Starting early and giving contributions as much time as possible to accumulate and take advantage of investment gains is just as important a factor for favourable outcomes as contribution levels and investment choices.” he added.