Workers have little idea of the cost of retirement income

Irish workers are wildly underestimating the amount they need to save for a modest pension income, according to a new survey.

Royal London asked people to estimate how much of a pension pot they would require to secure a weekly pension of just €200 – 80 per cent of the current contributory State pension.

More than four in 10 respondents said a private pension pot of €100,000 would deliver that income in retirement, with 15 per cent saying they would need just half of that – €50,000.

"In reality, you would need a fund in the region of €300,000 based on current annuity rates," said Mark Reilly, pensions proposition lead at Royal London. "The survey very clearly reveals that three-quarters of people underestimate how much money they'll need to fund a decent pension in retirement."

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He noted that, if people were so unaware of how much it would take to secure a modest pension, they were unlikely to put enough aside in pensions contributions through their working life.

The survey found that people living in Dublin were significantly more likely to be aware of the cost of retirement income.

It also noted that more than 50 per cent of Irish people expect to rely either on the State pension or bank savings for their income after they retire from work. Women will be noticeably more dependent on the State pension than men, the findings confirm.

State pension

Less than one-third of Dubliners expect to rely on the State pension alone while more than half of respondents in Munster do.

The survey of 1,000 adults found that only 28 per cent of adults at the early stages of their career (aged between 25 and 34) believed they would primarily be dependent on the State pension in retirement. However, that percentage jumped to 50 per cent for those aged 55 and over, who presumably had resigned themselves to such an outcome as they had not yet started saving into a private fund.

“The numbers are very revealing as to the prevailing attitude among the public towards pension provision,” said Mr Reilly.

He noted that Central Statistics Office projections say the number of people over the age of 65 in Ireland will treble to 1.45 million between 2011 and 2046.

“The task of financing this level of increased pension provision will fall to a decreasing share of the population. This coupled with Ireland’s low level of pension take-up is worrying,” he said.