Thursday, 23rd November 2017
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John Smiles

Qualified Financial Advisor

Pension Poverty

For 25 years, the pensions industry has been talking about the ‘pension’s time bomb’.

The Irish population is ageing and from 2016, we will see a large annual increase in the over 65 population, which is expected to treble in size to 1.4 million by 2040.

There has been much talk about the issue and the Government introduced new pension products such as Personal Retirement Savings Accounts [PRSAs] in an effort to increase pension coverage and reduce the exposure of the State to the cost of providing pensions benefits.

The most significant action from Government to date has been the Social Welfare and Pensions Act, 2011 in which the Government raised the qualification age for the State Old Age Pension to 66; from January 2021 it will rise to 67 and from January 2028 it increases to 68.

None of these measures has done anything to either improve the pension coverage in Ireland or to mitigate the poverty that many older people live in, at least that is what recent statistics from the Central Statistics Office [CSO] are telling us.

CSO figures show that the numbers of workers who have a private pension arrangement have fallen from 54% in 2008 to 47% in 2015.

Pension coverage for self-employed people has fared even worse with only 30% having a private pension arrangement in 2015 compared to the 46% who had one in 2008.

When asked why they made no pension provision for their retirement, 39% of people said they could not afford it; 22% said they just never got around to it; 9% said it was not available through their employer and 5% said they simply didn’t understand pensions.

As pension coverage declines, the numbers of people who will depend solely on the State Pension when they retire has increased from 26% in 2009 to 36% in 2015.

For many older people, life is difficult if they depend on the State pension. It is estimated that 25% of all pensioners are struggling financially, with 10% unable to meet an unexpected bill of €200 and about 3% unable to pay regular bills.

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