THERE IS a €20.2 billion annual shortfall in the amount people are paying into their pensions to meet their expected income in retirement, according to a pan-European study published yesterday.
That amounts to an average of €9,100 per year for every person expecting to retire between next year and 2051, said Aviva, which commissioned the report.
Middle-income people are worst affected, with an average pensions “gap” of 19 per cent of disposable income, according to the study.
Among the 12 countries surveyed, the per capita pension gap in Ireland is the third most severe – behind the UK and Germany.
Some 62 per cent of respondents said they were worried about having enough money in retirement, with 57 per cent saying they would aim to have pension income of at least three-quarters of their pre-retirement earnings.
Some 54 per cent of Irish people surveyed said they expected to work beyond the normal retirement age, a figure higher than elsewhere in Europe.
On the basis of the findings, Aviva has called for the production of a consolidated annual pension statement letting everyone in the State know how much they can expect in retirement on the basis of their pension savings at that point. It also wants a “sustained campaign of education”.
Aviva Ireland chief executive Jim Dowdall said: “We need to demystify pensions and improve financial literacy.”
The report, which acknowledges there is no “silver bullet” to address the pensions crisis, also urged reform of incentives.
Also yesterday, life firms and brokers called for the Government to abandon its proposal to reduce income tax relief on pension contributions from higher tax earners to 33 per cent from the effective current rate of 49 per cent.
A document commissioned by the Professional Insurance Brokers Association in response to the Government’s National Pensions Framework also called for the extension of more flexible Approved Retirement Funds. These do not lock pensioners into annuities at adverse points in the cycle, such as at present, when German bonds are yielding just under 2.5 per cent. Both measures are backed by the Irish Association of Pension Funds, pension managers and the Irish Association of Investment Managers.
