The failure of companies to provide proper pension schemes to employees coupled with widespread ignorance of the benefits of saving for the future is worsening the looming pension crisis, new research has indicated.
The insight into the nature of pensions among Ireland's workforce published by Irish Life on Tuesday mornning shows that only 46 per cent of working adults say there is a company pension plan available for them at work.
Under Irish law all employers are oblighed to provide access to either a company pension scheme or PRSA. They are not obliged to contribute to the funds or encourage or incentivise members to join such schemes.
More than three quarters of workers pay into such a scheme if it exists although almost half of those who do make savings into group pension plans have no idea how much their employer pays into .
Only one third of private sector workers have a private pension and, all things being equal, the rest will have to rely on the State pension when retirement comes. That is likely to put huge pressure on public finances and unlikely to be sufficent to fund people’s lifestyles in retirement.
Recent census data show the number of men who have reached the age of retirement has gone up by 22 per cent since 2011 with a 16 per cent increase recorded for women.
The looming crisis has prompted Minister for Social Protection Leo Varadkar to float the possibility of an SSIA-style savings scheme which would incentives workers to pay into their own "personal" pension funds.
The Irish Life research suggests that younger workers are more informed about their workplace pension than older colleagues with two-thirds of workers aged between 18-34 saying they knew how much their employer was contributing into their pension plan.
Only one quarter of those aged 55 or older were aware of the contribution levels being made by their employers. At 40 per cent, women were less aware of employer contribution rates than men on 56 per cent.
The research also shows that only 54 per cent of workers understand the tax benefits available to those who put money into pensions and it indicated that employer contribution pension plans are the second highest valued workplace benefits for employees in the Republic.
When asked what was the most important job benefit 25 per cent of employees rated workplace pension highest compared with 28 per cent who said they valued health insurance most.
Irish Life Corporate Business managing director Tony Lawless said it was worrying that so many people did not understand the tax breaks available on pension savings and more than half of those working say they do not have a group pension available to them.
“This highlights a significant lack of awareness, as all employers must provide access to either a company pension scheme or PRSA.”
He said an analysis of its defined pension book suggested that 90 per cent of people might not hit a target of achieving a pension of just one third of their final salary unless they save more. This indicates that pension awareness is still an issue for the industry and for the population.