Workers ‘increasingly worried’ about outliving their pension savings

Workers are increasingly worried about outliving their pension savings, according to a new international report by benefit consultants Mercer.

Just over one in four people is confident that they can save enough to fund a retirement that they expect to last between 15 and 20 years. In Ireland, the figure is closer to one in five, at 22 per cent.

More than two-thirds of the 7,000 people surveyed either do not expect to retire at all, or expect to continue working at some level after retirement, according to the data gathered in 12 countries – China, the United States, the United Kingdom, Ireland, Chile, Brazil, Mexico, Japan, Norway, Sweden, Denmark and Finland.

Presenting its summary forecast from the report, Mercer states: “We are unprepared. We foresee working longer, trading off, downsizing and adjusting expectations as eleventh hour measures to avoid outlasting our savings.”

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But, even though almost four out of five Irish people are not confident of putting away enough to cover their later years, the report says the Irish are less stressed and more optimistic both about their ability to maintain a desired quality of life and to live a long life (70 per cent expect to live beyond 80 years of age).

Tougher position

And while women are in a tougher position and worry more about finances, the gender gap in Ireland is less pronounced than in other countries surveyed.

Among the policy responses suggested by the report is the significant rise or even elimination of a specific retirement age. Alongside that will be a need to address bias among employers, and others, towards older people in the workforce.

“Individual productivity and earnings in later years would go a long way to improving the solvency of government pensions systems,” the report’s authors state. “In addition, research demonstrates that working correlates with improved health . . . thereby enabling older populations to remain both productive and healthy.”

About 5 per cent of Irish people don’t ever expect to retire, with the largest numbers among those currently aged 45-54. Another 11 per cent expect to work just as hard after retirement with the largest group – 49 per cent – still working but less than before they formally retired. Just 35 per cent expect to stop working fully on retirement.

Greater savings

Mercer says that to encourage greater savings, pensions need to be made more personal and accessible and to make greater use of digital tools.

“We need to transform saving into an engaging consumer experience rather than an onerous financial service,” the report says, arguing for simplified language, useful tools and the ability to track savings and their progress in real time.

It suggests pension providers could learn from the fitness industry’s adoption of technology to drive an “explosion in the saving industry”.

The bottom line, in the words of the report, is that health is vital for wealth.

“Every country in the survey ranks health in retirement as the number one priority – even higher than having enough income for basic necessities,” the report says. “And yet, just over one-third currently profess excellent or very good health as it relates to their ability to perform on the job.”