Brokers Ireland has advised workers to make whatever provision they can through savings, however small, for their later years.
The advice comes amid a survey of 227 Brokers showing that over 90pc believe employers are not yet ready to shoulder the extra costs involved in the planned auto enrolment pension scheme that would see workers, their employers and the State contribute to their future pensions.
Brokers Ireland said there are serious doubts that the scheme will now take effect as planned from next year, given the “seismic upheaval” caused by the Covid-19 pandemic - for the State and for employers.
“A majority of our members surveyed, almost 55 percent, believe employers will need three years to prepare for the additional costs of auto enrolment.
“Despite this, 80 percent believe their clients view auto enrolment and mandatory deductions as either positive or a step in the right direction, with just one in five seeing clients viewing it as a negative,” Rachel McGovern, Director of Financial Services at the organisation, said.
She said just last week the Central Bank estimated that €5 billion in excess pandemic savings could be unleashed post pandemic and suggested that a further €5 billion could be channelled elsewhere, including into deposits for home purchases.
“The big challenge here for consumers is the ease of thinking short term horizon versus considering the real value that can be delivered by sustained, regular saving, for mortgage, pension or any other long-term purpose. That is where most people need guidance,” she said.
In terms of pension planning she said most people begin to think about what they want to do in retirement in their 50s when it’s too late.
“Planning for retirement should start once we enter full time employment. Saving a little over a longer term is a lot better than scrambling in the last 10 years of working life to pull together some form of pensions’ pot.
“Auto enrolment, when it comes, will give you a pension but you should manage your own destiny, deciding the level of income you want in later years and planning for that,” Ms McGovern added.
Brokers Ireland today released figures indicating what a saving of just €100 a month, or €25 a week, could achieve, based on current pension products and market predictions, in non- indexed savings:
25-year old contributing €100 a month - €79,000 at 65
35-year old contributing €100 a month - €52,000 at 65
45-year old contributing €100 a month - €30,000 at 65
Ms McGovern said pension tax relief is extremely valuable. Workers on over €35,300 get €40 back from every €100 they contribute towards a pension and those on lower incomes who are on the standard tax rate get €20 back on every €100.