Ignorance still prevails for pension scheme members

Two-thirds of mature private pension scheme members either don't know how much they will receive in retirement income or whether their pension will be paid monthly or as a lump sum.

While uncertainty over pension payment might be expected to people in defined contribution schemes – where the outcome depends on investment performance to retirement – the study found that half of defined benefit or final salary schemes were unable to say what percentage of salary they would receive in retirement.

Under DB schemes, the retirement income is determined by salary at retirement and number of years served, making it straightforward to determine pension payment.

The findings of the study, authored by Alan Barrett and Brendan Whelan form the Economic and Social Research Institute and Irene Mosca from Trinity College, were based on data from the ongoing Irish Longitudinal Study on Ageing (Tilda) and are described by the authors as "striking".

The study says men are better informed than women on pension issues, though they were still poorly informed. Fifty-three per cent of men did not know the amount they would be paid in retirement compared to 60 per cent for women.

Better educated people were better informed, the study found, and knowledge seems to increase for those closer to retirement age.

The authors said such low levels of information on pensions are a source of concern, especially as the study was confined to pension scheme members who were over the age of 50.

“Hence, they are likely to be among the best-informed people in the population,” they said. “If this study was replicated for other groups, the lack of knowledge would probably be greater.

“At one level, the clear implication is a need to increase knowledge and understanding of pensions through public information campaigns. But if this fails, the question arises as to whether some form of mandatory contributions may be required.”