Financial education required to boost pension participation

To stave off pensions ‘time-bomb’, more education needed to highlight benefits

By Frank Conway



Protecting and growing personal wealth
Financial education needed to highlight benefits of long-term pension contributions

A report from the Central Statistics Office today shows that the number of workers who had a pension in the fourth quarter of last year fell to 46.7% compared to 51.2% in the fourth quarter of 2009.

Considering that Ireland has experienced the most crushing debt laden economic meltdown in living memory, the numbers could have been far worse. But that is not to take away from the very serious issue of so few having no pension provision at all other than the state pension.

Today’s numbers are the first study since 2009 and form part of the CSO’s latest quarterly Household National Survey.

To put things into perspective, 42% of workers said they expected an occupational or personal pension would be their main source of income when they retired.

However, the proportion of workers who expected the state pension to be their main source of income rose from 26% in 2009 to 36% in the fourth quarter of last year – highlighting the deepening pension crisis facing the country. It also reinforces the extremely difficult period the vast majority of families across Ireland have had to endure since the last study in 2009. And it is not just the broad economic conditions. Growing taxes and charges, including the USC, rising college and secondary school costs, rising insurance costs just to name a few are limiting the financial capacity of families to find the additional funds to pay into private pensions.

More men than women had pension cover – with the level of coverage for male workers coming in at 47.2% and for female workers at 46.2%.

They also reveal that pension coverage was lowest amongst the youngest workers. Just 14.1% of workers aged between 20 and 24 had a pension in the fourth quarter of last year, while 36% of workers aged between 25 and 34 had a pension.

The CSO said that pension coverage was highest among workers aged between 35 and 44 years of age, standing at 55.3%.

Across Ireland, what is needed is a broad, sustained awareness campaign that highlights the benefits of pension contribution and participation. There must also be greater focus on financial education, with a particular emphasis on money management. And, there must also be a focus on management fees that are applied to pensions as these can significantly reduce the overall value of any investment.

When people are shown the enormous financial benefits of a long-term savings culture for themselves personally through a pension structure, where they can make a direct connection of their monthly contributions, tax relief, company matching and long-term money growth, there is a much greater buy-in. But if there is little or no education or continuous communication, then most people will view pensions as a bit of a black hole. And without clarity and goal-setting, pensions will remain a mystery to many people where most will continue to opt out.

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