While most Irish people can meet their current financial obligations, they have put little or nothing aside to protect them from financial shocks, according to research from the Competition and Consumer Protection Commission (CCPC).
The CCPC’s financial well-being study examined the circumstances which influence financial decision-making, the extent to which people can meet their financial needs comfortably and their financial resilience.
The study grouped respondents into four categories of relative financial well-being.
It found that 52 per cent of consumers can meet their financial commitments but have little provision should their finances take a turn for the worst.
A quarter of those who took part in the study were considered to be financially ‘secure’ as both their current financial situation and their provision for the future were strong, with some improvement to be made in planning for retirement.
A further 16 per cent of respondents were ‘just about coping’ and appeared to be at risk of falling into financial difficulties while 7 per cent were ‘struggling’ and in financial difficulty with no reserves to protect themselves.
Overall, the CCPC’s report found that people in the Republic were faring well in terms of general financial well-being, with an average score of 64 out of 100.
In terms of international comparisons, the overall score for Ireland was lower than Norway which was on 77 but higher than Australia and New Zealand which were on 59 and on a par with Canada, where the overall score was 65.
Vital insights
Commenting on the findings of the study, the chairwoman of the CCPC Isolde Goggin said it offered "vital insights into financial capability and well-being in Ireland and how it could be further improved".
She said it was “encouraging to see that Ireland has an overall score of 64, but there is plenty of scope to improve our financial well-being.”
The CCPC’s research found that for many people, financial well-being is improved through two key behaviours: ‘active saving’ and ‘not borrowing for daily expenses’.
The research found that automatic enrolment in a workplace pension scheme was a decisive factor in increasing a consumer’s levels of resilience for their retirement.
Simply having the option of enrolling in a workplace scheme does not appear to be sufficient on its own and the report suggests that the overall policy objective of automatic enrolment, if correctly targeted, could be expected to have a positive effect on the resilience for retirement of Irish consumers.
Ms Goggin said the “important question now is what can be done to help improve the financial capability of individuals in all four categories. “
She said the CCPC research, “unsurprisingly, confirmed that income and employment status are crucially linked to better financial well-being” and said that while information will promote better financial capability over time for many people, “information is unlikely to provide either help or comfort [for others]”.
She said she hoped the research could “assist those who are tasked with developing supports to help those who are just about coping and in financial difficulty.”
