Almost half of Irish consumers to rely on State pension when they retire

Almost half of Irish consumers expect the State pension, which equates to about €13,000 a year, to be their primary source of income in retirement, a survey by KBC Bank Ireland has found.

One-third of people surveyed also expect to find themselves in financial difficulties when they retire.

Ireland is currently one of only two OECD countries without a mandatory earnings-related element to retirement, despite the low level of pension coverage here. The Government has promised to implement an auto-enrolment scheme by 2022.

Austin Hughes, chief economist at KBC Bank Ireland who carried out the analysis, said there was a worrying disconnect between what people wanted from retirement and what they were financially planning for.

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“It’s as though the future is another country that people don’t expect to visit for some time and they don’t see the need to have the passport of a pension until just before they travel,” he said.

Pension circumstances

As part of its monthly consumer sentiment survey, KBC Bank asked consumers a number of additional questions in relation to personal pension circumstances.

The survey found that while Irish consumers had a strong sense of what they wanted to do in retirement, they were far less certain how they would fund it.

Only a fifth of people expected to be “financially comfortable” in retirement, while 35 per cent envisaged financial difficulties.

More than half of consumers (53 per cent) think their spending power will drop in retirement, with a fall of less than 25 per cent the most common expectation, the survey of 1,000 adults found.

It was not simply financial constraints that stopped people getting adequate cover. Just one in three consumers without a pension plan said it was because they could not afford one.

A similar proportion said they have not thought about it, or don’t know enough about pensions.

"For a range of reasons, including but reaching well beyond affordability, there is a significant gap between the resources, both in terms of finances and planning, that Irish consumers are devoting to pensions today and the retirement they desire tomorrow," Mr Hughes said.

Repaying the mortgage

Buying a home and repaying the mortgage were more important saving priorities than a pension for most age groups, the survey found, with 29 per cent of consumers citing repaying borrowings as the most important priority when considering saving.

John Gethin from KBC Life and Pensions division said: "The survey results highlight a tendency to regard pensions as something that can wait while more immediate concerns around housing, education or holidays are dealt with."

The survey also attempted to gauge the impact of Covid-19 on people’s retirement plans.

It found that 29 per cent of consumers think they may have to retire later than they expected, while 37 per cent saw no impact and 31 per cent were unsure.