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Aged 50 or over? Consider your retirement fund options now

If you haven’t yet thought about what to do with your retirement fund, here’s some advice

Source: Fiona Reddin, www.irishtimes.com


If you’re 50 years or over, and haven’t yet started to think about what you’re going to do with your retirement fund when you become a pensioner, it’s time to knuckle down and consider your options.

At present, if you’re currently enrolled in a defined contribution (DC) scheme, your two big options heading into retirement are going to be either an annuity, or an approved retirement fund (ARF). But both are very different, and both require different planning strategies in the years leading up to retirement.

So, if you’re aged 50 or over, it’s time to get planning.

As Trevor Booth, chief executive of Mercer Financial Services, advises, “The more informed you are, the better the quality of the decisions you’re going to make.” And when you consider it’s about ensuring you don’t end up penurious in retirement, the quality of your decision-making is crucial.


Annuity v ARF

In years gone by, pension savers would generally find themselves in a defined benefit (DB), or final salary, scheme, of which an annuity was an essential part. Essentially, your employer guaranteed a set level of retirement income as a proportion of your final working earnings – generally two-thirds, for those with full benefits.

The advantage of annuities is that they offer a guaranteed income until you die, and sometimes even after, with some products offering spousal income. You can also provide for inflation-proofing, at a cost. So there’s no fear of your pension fund bottoming out with an annuity, and this guaranteed income offers peace of mind.

What we’ve been seeing across the board is a move away from annuities to ARFs

However, the problem for many people who are now coming to retirement is that they aren’t coming with the bounty offered by a DB scheme. DB schemes are a vanishing species, at least in the private sector, as the cost of providing them – and accounting for the liability on their books – proved too onerous for companies. DC schemes are now the norm.

In addition, current annuity rates mean that a lifetime of savings can equate to a less-than-expected income in retirement.

“What we’ve been seeing across the board is a move away from annuities to ARFs,” says Cian Hurley, a senior consultant in Willis Towers Watson’s investment practice, because “annuities are quite poor value at the moment”.

Booth agrees, noting that about two in three retirees will now opt for an ARF over an annuity. These with larger pension funds tend to go for an ARF, while those with smaller funds choose an annuity.

Current annuity rates are about 4-5 per cent, depending on your age. For example, a 61-year-old might get a rate of 4.179 per cent with Irish Life; but this rate could increase if you have a history of poor health and qualify for an enhanced annuity.

With such rates, however, Booth notes that someone retiring at 65 will have to wait 23 years, or until they’re 88, to get all their capital back from an annuity. Not only that, but he says that statistics show that a 65-year old has just a one in two chance of getting all their money back by living that long.

If you want to inflation-proof the annuity income or provide for a spouse, the rate on offer would be noticeably lower and the time to recover your capital even longer.

“There will be winners and losers on it [an annuity],” he says.

An ARF, on the other hand, can give you substantially more flexibility. In effect, this brings your pension fund with you into retirement, once you draw down your tax-free lump-sum.


When you die, it can be passed tax-free to your spouse, or to your children – although tax issues will arise for them.

It means that you can continue to grow your capital, as you are still exposed to market movements, although there is a mandatory draw-down, of 4 per cent a year if you are 60 years or over, increasing to 5 per cent at 70, or 6 per cent if you have pension assets of €2 million or more and are over 60 years of age for the full tax year.

But – and it’s quite a big but – ARFs also face the risk of running out of money. Depending on how much is in your ARF, if the return on your ARF after charges fails to match your draw-down rate (ie 4-6 per cent a year), the capital will reduce each year, eventually potentially running out. This can also be hastened if the investments perform poorly.

“What also comes into play is longevity risk,” says Hurley. Should you stay alive for a very long time, it will put more pressure on your funds should you opt for an ARF.


ARF then annuity?

Remember, your decision doesn’t have to be final at retirement. There’s nothing to stop you from going into an ARF at retirement, and then switching to an annuity at a later date. However, according to Booth, “it’s very rare that we see this.” Rather, “people feel intuitively that one route or another works best for them.”

And there may be a reason why. Due to “mortality drag”, someone aged 75 might be expected to live longer than the 88 years that was predicted when they were 65; and this means they will get a lower annuity rate at 75 than they might have expected.

For this approach to make sense, Booth says that you’ll need to either:

  1. a) generate a return on your ARF, or;
  2. b) hope that annuity costs will fall and you get a higher rate.

At the moment, there is no hybrid product between the two, but “perhaps that’s something we need to look at”, says Hurley.



The tax question

Whether you opt for an ARF or an annuity might also be a factor of how much of a tax-free lump sum you can get. Under current rules, if you opt for an ARF, you can immediately draw down 25 per cent of your pension fund tax-free. If you opt for an annuity, however, your maximum lump sum will be 1.5 times your final salary.

So, if you retire with a pension fund worth €450,000, you will be able to draw down €112,500 tax-free with an ARF. If you were on a final salary of €100,000, you will be able to get €150,000 tax-free if you opt for an annuity, although it should be noted that the rules on 1.5 times salary are a bit more complicated than this, and not everyone may get the full amount.

So this is also an important consideration.

“Generally, if the retirement fund is small, 1.5 times your earnings is likely to be more attractive, and you’ll buy an annuity with the remainder,” says Shane O’Farrell, head of products, Irish Life Corporate Business.

But more flexibility is still called for. Booth and others in the industry would like to see the rules loosened on this, so that people opting for the 1.5-times salary option are also given the option to buy an ARF.


Lifestyling shift

Another reason why it is important to start thinking about these issues many years from retirement is that your DC fund manager will likely be positioning you towards a certain outcome if you are in a default fund – which is where the vast majority of people are likely to be.

The goal of lifestyling is to make sure that members are in the right type of fund at the right time – for instance to avoid a situation where someone with a year to retirement is not 100 per cent invested in equities and therefore extremely exposed to a potential drop in markets.

The benefit of a lifestyling strategy is that it “takes out having to make active decisions about when and where to invest your assets”, says Hurley. It is aimed typically at members in a scheme who opt for the default option.

However, you need to make sure it matches your end goal. For example, there’s no point in switching your portfolio to bonds – which will match an annuity – if you want to stay invested in an ARF at retirement.

Given the shift in preference to ARFs, fund managers have started to adapt their lifestyling strategies in recent years.

Pension savers in New Ireland’s Individual Retirement Investment Strategy, for example, used to transition portfolios to 75 per cent in “long bonds” and 25 per cent in cash at retirement. Now, however, aware of the preferences for ARFs, savers will end up with 75 per cent in low- to medium-risk assets at retirement, and 25 per cent cash.

Similarly, Irish Life has moved to adapt its lifestyling approach. O’Farrell explains that funds will now have longer to grow, as the de-risking phase has been cut from 20 years to 11 years before retirement. This reflects the use of a multi-asset range of funds which it now offers pension savers, that have lower volatility and greater diversification than the equity heavy pension funds of old.

In the last six years before retirement, Irish Life will assess your most likely benefit route at retirement and place you in either an annuity targeting fund (where the multiple of salary route gives the highest tax-free lump sum) or into an ARF targeting fund (where 25 per cent of the retirement savings will give the highest tax-free lump sum).

If you want to retire early, at 60, then your lifestyle strategy may have more risk than it should

“Of course, people can also make their own active decision and select another investment option, but very few do,” says O’Farrell. But for some people, making their own decisions, rather than the default one, will be crucial.

“What’s suitable for majority may not be suitable for you,” says Booth, while Hurley adds that lifestyling can be a “pretty blunt instrument by its very nature, because it doesn’t really take into account members’ unique circumstances”.

“Where they don’t work, is where people want to retire early, and want to take more risk or less risk,” he says, adding, “if you want to retire early, at 60, then your lifestyle strategy may have more risk than it should.”


When to decide?

For Hurley, you should be meeting your pensions adviser about 10 years out from your proposed retirement date to discuss how you expect you’ll take your benefits in retirement.

Booth agrees, adding that factors to think about include understanding what average life expectancy is , how long will it take to get the capital back, and what your current health state is.

And when it comes to picking a product, do shop around. Remember, you have the right to purchase an annuity or ARF from any provider – not just your current pension provider.


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Cabinet agrees bill to allow public servants to work until 70

Public servants recruited before 1 April 2004 face mandatory retirement at 65

The Government has agreed the text of new legislation that will allow thousands of public servants work until they are 70 years of age.

As people are living longer and are in better health, many public servants want to work for longer, but they cannot because of a mandatory retirement age of 65 for those recruited before 2004.

Today, the Minister for Finance Paschal Donohoe brought the Public Service Superannuation (Age of Retirement) Bill 2018 for approval by his Cabinet colleagues.

The bill provides for an increase to age 70 in the compulsory retirement age for most public servants recruited before 1 April 2004.

This group of public servants currently has a compulsory retirement age of 65.

Public Servants recruited after 1 April 2004 are not affected by the changes agreed today as they either already have a retirement age of 70, as they are Single Pension Scheme members, or they have no compulsory retirement age as they were recruited between 1 April 2004 and 31 December 2012.

On 5 December last, the Government agreed that the compulsory retirement age of most public servants recruited before 1 April 2004 should be increased to age 70.

Today the necessary legislation for this change was agreed.


The bill is on the priority list of legislation to be published and it is expected to be published in the coming days.

While the new proposal will allow most public sector employees to work up to 70 years of age, they will be still be free to retire at the minimum retirement age if they so wish.

The bill provides for the amendment of all relevant public service pension schemes so that these schemes will allow members to accrue pension benefits on their service between the age of 65 and 70.

It is understood that there is widespread political support for this measure and a Government spokeswoman said: “Staff interests have been consulted and are anxious to have the legislation enacted.”

Reporter, RTÉ Political Staff

Reference: www.rte.ie

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Why everyone needs expert financial advice


We don’t perform surgery on ourselves or extract our own teeth, they say only fools represent themselves in court and yet we make some of the most important and expensive financial decisions of our lives, without ever consulting a financial expert.

Big mistake.

We’ve learned to our cost in Ireland, that overloading on property-based debt can produce not just disastrous outcomes for individuals, but an entire nation.

Even everyday things like buying the appropriate home insurance have led to serious financial hardship for thousands across the country, simply because people don’t always know what they’re buying.

In this case, the unfortunate homeowners will deeply regret not just the flood damage, but not taking informed advice.

Financial advice should be personal

Expert advice is centred on ensuring you get what’s best for you. A financial advisor can help you connect the dots between a good plan and the right products – all with an impartiality that’s impossible to achieve on your own.

And, if your personal circumstances or the markets hit a wobble, they can provide the calming rationale you might need to turn things back around.

If we’re lucky, our first lessons in the art of money management start in childhood.

We’re given a piggy bank for pocket money and in time, it’s transferred into a child-friendly savings account in the post office, credit union or local bank and the life-long ritual of saving begins.

By the time we start earning our own living, we’ve hopefully managed to open a current account or arrange a small personal loan, without making too many mistakes.

Yet, under time pressure and most likely transacting online, how many of us shop around for the best terms and conditions when it comes to financial products?

It’s fair to say, the average young working adult will now spend more time researching their next smart phone than their first pension, despite the fact our financial lives are becoming more complex.
That’s something we really need to redress.

Financial decisions deserve our time and attention

A cavalier approach has no place when it comes to 30-year mortgages, insurance that protects the people and possessions we value most, and pensions that determine how we will spend the last quarter of our lives.

How many people fully understand the asset allocation that sits behind their pension, how tax relief works or even how to claim their retirement income come the time?

Very few is my guess, but here’s the thing…that’s okay, provided you get the advice you need.

Be planned and be practical

The earlier you strike up a relationship with a good independent advisor, the better.

That might be when you join an occupational pension plan, start investing, get married or buy your first home. And of course, starting a family will take you into a whole new world of financial challenges.

Good financial advice can help with all of that.

At its most basic, the role of an investment advisor is to create a realistic plan that will help you reach your financial goals. They can help get you there too, with practical advice on how to increase your income, budget better, invest wisely and sense check your spending priorities.

One of the greatest dangers of taking a DIY approach is that you never get an objective view of your financial position that includes all the bells and whistles, like income, tax, spending, saving, debt, assets and liabilities.

There’s no synergy between piecemeal actions and as a result, you end up reacting to events rather than planning for them. That means you’re also more vulnerable to short-term crises and run the risk of getting sucked in by headlines and hype.

With a neutral, informed voice at the other end of the conversation, you’ll be reminded there’s a tailored plan in place, allowing you to remain focused, resist the temptation to take unnecessary risks and make better financial decisions generally.
Now, what part of that doesn’t make sense?

Reference: www.irishlife.ie, Jill Kerby, Personal Finance Journalist.

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Funding a full retirement

For former geologist Andy Sleeman, the measure of his retirement success is the time it allows him to spend with his grandchildren, and on his boat

Retirement may be feared by some and eagerly anticipated by others. Geologist, Andy Sleeman was in the latter category. Long-haul travel, a boat and spending lots of time with the grandkids were just some of the things Sleeman had on his retirement list.

After squirreling away a substantial pension pot during his 35 years working as a geologist, when he finally took early retirement in 2009, at the age of 62, all of his dreams became a reality. He bought a boat and named it Galatea, he travels extensively and he spends a healthy amount of time looking after his five grandchildren. Born in Devonshire, Sleeman went to school in Bristol and studied Geology at the University of Liverpool. He met his wife Cherry when he moved to Dublin to take up a PhD at Trinity College and set up home in Ireland soon after.

Sleeman says that while his career and working life was a wonderfully enriching experience, he also looked forward to the day he would retire and could pursue with greater vigour some of his other passions. He says having a decent pension allowed him do just that.

He admits there were times it was a little bit of a struggle to save, but he’s grateful he started contributing to his pension when he did, as he can still live the lifestyle he had previously, but now with much more freedom.

“I worked for the Geological Survey of Ireland, a government body. I joined in 1974 on a temporary capacity, and in 1976 I was made permanent but when I came to retirement age my pension rights were backdated to 1974, which was nice as I hadn’t anticipated that,” he says.

Voluntary contributions

While Sleeman’s civil service pension was part of his deferred pay, he made additional voluntary contributions, as much as he could, all the way through his working life, in order to ensure he would not have to curtail his lifestyle come retirement.

“With a civil service pension, it meant that you got half your final salary if you worked for 40 years. I worked for 35 and made additional voluntary contributions for much of my career to top up the pension.

“It was a struggle because the children were in secondary school and going off to college and there was a huge amount of expenditure going out. I wasn’t able to put as much into it at the beginning as I would have liked but once I got closer to retirement age and the children had left home, I was able to put the maximum amount in. In the last five years that was about €20,000 a year. With the tax relief, I could afford to put the maximum in without changing the way we lived and my wife was doing the same,” he says.Looking back on the day he was handed “the golden watch”, Sleeman says he had nothing but positivity about entering into retirement.

“It was a great feeling. I had completed the projects I was really interested in, in my job and I had stayed a year longer than I had intended to. I was ready to go and I could afford to do it,” he says.

As he entered into his retirement, he had extensive plans and was able to execute them with ease – including buying that boat.

“I had done a lot of sailing previously and I thought that would be a great retirement project. We got to take a lot more holidays. We’ve been to South Africa quite a lot, as my son-in- law is from there, we’ve been to Canada a few times, as well as New Zealand, Peru and the United States to name a few. I didn’t spend as much time on the boat as I anticipated, instead I spend a lot of time looking after my grandkids, but I really enjoy that.

“We have three grandkids here and two in London and there was a point when I had to be in London one weekend a month. My pension has allowed me to do that and it has also allowed me help my children with not only their primary degrees but they all went back for their second and third degrees. It was really nice to be able to do that.”

Start early

While he understands the struggles are great for young people these days, Sleeman’s advice for anyone considering starting a pension is simply “do it now”.

“Start one as soon as you can and put as much as you can in there. I’ve been impressing upon all my four children that you need to put in as much as possible. If you don’t want to reduce your lifestyle when you retire then you need to end up with half of your final salary or preferably 60 per cent to 65 per cent of it.”My wife was a social worker and she had three different pensions and between the two of us we’re reasonably comfortable.” Now living in Newcastle, Co Wicklow, he is honorary treasurer in his parish church and is also the choir director. This is one passion Sleeman relished when he stopped working.

“I’ve been in choirs all my life, and it’s a very important part of my life. I sang in St Patrick’s cathedral for 20 years while working in Dublin. The fact that I can spend a lot more time being involved in this now is wonderful.”

Family history is another pastime of Sleeman’s, and he has traced his family tree all the way back to the late 1500s. Another pursuit, woodwork, is lower down the list, given the numerous activities he partakes in.

“The job was very rewarding and I still keep my hand in a little bit doing field trips for horticultural garden-design students. My wife went back to do a course in garden design and I got roped in to doing the basic geology for them. We have a very full active retirement, a bit too full at times but it’s great.” he laughs.

Reference: www.zurichlife.ie

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How To Restructure Your Investments For Retirement

You’ve earned and saved money and now you’re headed into retirement. What could go wrong? Along with a new schedule and opportunities come new questions and challenges, particularly around finances. The most pressing ones are often: “Do I have enough savings to last my lifetime?” and “How do I turn my nest egg into a paycheque that I can count on throughout retirement?”

One of the biggest changes in retirement is going from receiving a consistent paycheque to needing to generate your own cashflow to cover expenses. This shift requires a new investment strategy and mindset.

The 3 Phases of Retirement

To start, you’ll want to think of retirement as a series of three unique stages:

The “Go Go” Years In the first years of retirement, you’ll likely be focused on the fun things in life, such as travel or enjoying activities with friends and family. The result can be a spike in lifestyle expenses. During this period, your investment strategy should account for a faster withdrawal rate from your portfolio and more money going out the door.

The “Slow Go” Years Throughout these years, it’s likely you’ll settle into a routine. Your desire to be as active may taper off, and with it, life expenses can tend to go down.

The “No Go” Years More people are living into their 90s or beyond. While this is a testament to our medical advancements, increased longevity is often accompanied by physical limitations. At this point in life, you may scale back your activity even more and find that your remaining expenses are focused on daily living and possibly health care-related.

5 Ways to Restructure Your Portfolio for Retirement

Throughout the different phases of retirement, you’ll need to develop strategies around covering your day-to-day expenses as well as the best ways to tap into your assets. Both strategies should meet your goals and reflect your views on risk. Regardless of your circumstances, be sure to address five key areas when mapping out your retirement income plan:

  1. Protect against sequence risk If the stock market takes a tumble and you’re not appropriately diversified, you could be forced to pull money out of investments that have declined precipitously. The returns during the first few years of retirement can have an especially significant impact on your long-term wealth picture — this is known as “sequence risk.”So consider keeping some of your money in liquid investments such as cash or other relatively safe, short-term vehicles to cover expenses for the first two or three years of retirement.
  1. Match your assets to your expenses  Identify which of your expenses are required to meet your basic needs of living, (such as food, shelter, utilities and health care) and which are discretionary (like travel and hobbies). Then, target sources of guaranteed or stable income to meet your essential expenses. This can include Social Security, a pension if you’ll get one and perhaps an annuity with guaranteed payments. You can use investments that may vary in value to meet your discretionary expenses.
  1. Remember that taxes are an ongoing expense   As you create your own paycheque in retirement from your savings, remember that you may still have a tax liability. Unlike your working years, taxes may not be automatically withheld from your sources of cashflow. Even the majority of Social Security recipients are subject to tax on the benefits they receive.Depending on how effectively you manage your income level, you may qualify for a 0% long-term capital gains tax rate when liquidating certain investments in a taxable account.Working with a financial professional before, and throughout, retirement can help you calculate how much you may owe in taxes or which tax breaks you may be eligible to receive.
  1. Pay attention to required distribution rules for your retirement accounts I f you have money in traditional Individual Retirement Accounts (IRAs) or workplace retirement plans, remember to comply with the government’s required minimum distribution (RMD) rules.After age 70 1/2, you must take withdrawals from these accounts annually — even if you don’t need the money — based on a schedule provided by the Internal Revenue Service. Failure to comply can result in a significant tax penalty. (Money held in Roth IRAs is not subject to RMD rules).
  1. Keep in mind that growth is still a concern  When you are younger and accumulating wealth, your primary investment focus is growing your assets. However, in retirement you need to think about the potential impact that inflation could have on your future income needs.

To keep pace with rising living costs, you will still need to grow your assets. That may mean keeping a portion of your portfolio invested in equities that historically have outpaced inflation, but could also be subject to more market volatility.

Start planning early to protect what you’ve accumulated and position your assets for their new purpose — to generate income to last throughout your retirement.

Source: Marcy Keckler, Next Avenue Contributor, Forbes.com, Nov 14th 2017

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Mind the Gap: Women’s attitudes towards pensions must change

To close the pensions savings gap we need to raise awareness of the importance of saving as young as possible for both genders, but particularly for women.

We want young women going into the workforce with a really clear view of what they need to do to get to their retirement

Women are far less likely to save for their retirement than men, according to new research carried out by Aviva. The research shows that men are much more aware of pensions and the benefits of saving.

This is partly a legacy issue arising from the marriage bar which, until it was abolished in 1973, forced many women to leave the workforce when they got married. But women also tend to take more career breaks either to have babies or to care for young children or elderly parents.

On the other hand, women live longer and without income from pensions to supplement welfare payments, they are more vulnerable to poverty in their retirement, says Aimee Scriven, retirement solutions proposition manager at Aviva.

“Women’s attitudes towards pensions need to change. We want young women going into the workforce to have a really clear view of what they need to set aside throughout their working lives to enjoy a decent standard of living in their retirement,” she says.

Calculate your own pension gap – click here to go to the pension gap calculator

The research, which was carried out by Ipsos Mori as part of Aviva Ireland’s Consumer Attitudes Survey, found that almost half of women, as against just 27 per cent of men, say they don’t understand pensions and investments*. A quarter of women admit they haven’t considered how much they would need for a comfortable retirement and yet they worry about not having enough.

“In comparison to 25 per cent of men, almost 40 per cent of women are worried they won’t have enough money to provide an adequate standard of living in retirement. But despite their worry, only 8 per cent of women are taking steps to do something about this as against 25 per cent of men*,” she says.

Aviva published its ‘Mind the Gap’ Pensions’ Report last year which found that Ireland’s annual pension savings gap (that’s the amount of money people are currently saving for their pension versus the income most likely needed to provide an adequate standard of living in retirement), increased from €20.2 billion in 2010 to €27.8 billion in 2016. This means that Ireland has the joint-second largest pension savings gap in Europe**.

Raising awareness among women about the need to prepare for retirement is a must in order to encourage people to close that gap, says Scriven.

“The pension gender gap is caused by a number of factors: women are more likely to take career breaks, for things like maternity leave. Another factor is that almost 70 per cent of part-time workers in Ireland are women. That has a huge impact on their contributions to any kind of occupational scheme and also, on their entitlement to the contributory State pension as well,” she says.

She says some women still hold an old-fashioned notion that they can rely solely on their husband for financial security. “A lot of women in their fifties are in that space and are possibly thinking there is no point in doing anything about it now, that it’s not going to make any difference, starting to save towards a pension. We would say absolutely not, saving for five years is better than saving nothing.

“If I look to my own family, my grandmother had nothing to do with the home finances, then to my mum who might have had a bit more to do with it. But she never worried about a pension as that was my dad’s job, to earn the money and bring in the pension. I am in my very early thirties and I’m very much more clued in about pensions and I’ve been saving into mine since I was 18.”

Scriven says younger women do think differently when it comes to pensions but more needs to be done to inform the next generation. She says children need should be taught in secondary school about the importance of forward planning and saving for their future.

“We need to start the education process around pensions at a much younger age for both genders, but particularly for females. The world has changed and women are much more self-sufficient and independent. Things like how long they take out of the workforce for maternity, that’s never going to change, so it’s the things they can do to help themselves and to be mindful of that when they’re thinking about what retirement is going to look like for them.

Ann O’Keeffe, Aviva’s head of Individual Life and Pensions welcomes the recent announcement by the Taoiseach, Leo Varadkar, that a system of auto-enrolment in a pension scheme for all private sector workers will be in place by 2021.

“As we pointed out in our Mind the Gap Report, such a move will raise the level of coverage across the population. But the devil will be in the detail: we look forward to further information when the Government publishes its five-year Pension reform roadmap before the end of the year. It is important that the level of contributions to the proposed universal scheme should be adequate to fund retirement for private sector workers, men and women alike.

“Thankfully, we are all living longer, more active lives and our good fortune in this respect should not become a financial burden. That is why we need to ensure that women – as well as men – understand the benefit of financial planning as early as possible in their careers. It is the responsibility of all of us who work in the pensions’ industry to ensure that we play our part in educating women about pensions,” she says.

Reference: The Irish Times

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Sustainability of pension system cause for concern

After the Budget there was lots of focus given to the anomaly in the State pension system that left many workers – most of them women – with less money than they might otherwise have been entitled to. However a new report suggests that that is just one of the issues facing the pension system here, with its sustainability in particular being flagged as an area of concern.

The Melbourne Mercer Global Pensions Index ranked Ireland 12th out of a survey of 30 countries, but the country got a D grade in terms of sustainability.

“We actually rank third out the 30 countries in terms of the adequacy of benefit that the system is targeting but we’re 20th in terms of sustainability,” said Peter Burke, senior defined contribution consultant at Mercer Ireland. “There are a few factors that go into that – one being the coverage level of private sector savings in relation to retirement and the other would be the fact that we’re living longer so any pension needs to be paid for a longer period of time.”

That creates a particular pressure on the State pension, he says, as the system is on a “pay as you go basis”. That has worked in the past because there have always been enough workers to spread the cost of retirees – however that balance may shift as the population ages and the ratio of employees to pensioners narrows.Those issues – and other shortcomings – have led to a significant financial hole within the Irish pensions system – something that will take hundreds of billions of euro to address, according to Mr Burke. “At the moment the research is pointing towards a figure of about €560 billion in terms of the pensions savings gap in this country,” he said. “Every year that we allow this challenge to remain as it is, the problem is just getting worse.”
One of the current problems with pensions is the fact that – at the moment – they are particularly unattractive to people due to low interest rates and the potential for low returns. As a result many will see the little gain they might make being gobbled up by fees – leaving them with little incentive to save further. Mr Burke said there is more companies can do to address this – which might make a pension more attractive to individuals.
“There’s always something that can be done in terms of fees and obviously there’s competitive pressure in the market that will reduce fees further,” he said.

However any solution to the pensions problem needs to go beyond this, he added, and include some kind of auto-enrolement system. This would oblige employers to add staff into a pension scheme automatically, which would help to boost the numbers saving for retirement in the State. “It’s where there’s a legislative change whereby the employer not only has to set up a certain minimum qualifying pension scheme but then has to enrol employees into it,” he said. “At that stage employees have the opportunity to leave that pension scheme – no-one is going to force anyone to save for retirement but the experience we’ve seen from other countries is that people tend to stay within these systems through natural inertia and that will increase the coverage level for private sector schemes and, overall, improve the sustainability of our system,” he added.Reference: www.rte.ie

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Retire and stop? Not in the future says pension forecaster

As the way we live changes so will our pensions, but planning for a reimagined pensions future is more important than ever

“[In the future] we expect that our approach to retirement will become much more flexible. Instead of just ‘retire and stop’ people are likely to continue working as long as they can, perhaps slowing down, but not simply ‘stopping’ work,” says Klaus Mogensen, a futurist with the Copenhagen Institute for Futures Studies in Denmark.

As more lifestyle opportunities become inexpensive or free, thanks to the internet, life choices in later life will change also. “If you are not focused overly on such material matters as a big house or car, you will be able to live a rich life fairly inexpensively, by perhaps not taking holidays to exotic destinations, but holidaying in your own country, and by availing of things like online education which will be free or inexpensive,” he says.

Indeed, we may become less acquisitive generally. “A lot of futurists are saying we will soon reach ‘peak stuff’ in terms of material consumption,” said Mogensen. “What makes a life interesting is not ‘stuff’. It is access to material wealth that will become more important than owning it.”

The “sharing economy” will see people not own cars, for example, but subscribe to them on a service basis.  “We can feel liberated by giving up the stuff we own, because stuff ties you to one place,” says Mogensen, who identifies the trend as ‘freedom from ownership’. “In the past we used to talk about freedom from want.  In the future we will be able to have access to things without owning them.”

That could have a knock-on effect on property. “You won’t need a big kitchen if you’re going to eat out all the time, you won’t need a big sitting room if you are going out to socialise with your friends and you won’t need a big TV if you can watch on your mobile devices,” he says.

Such trends could liberate us from the tyranny of home ownership, in which “so much of our income and savings is tied up.”

There are negatives too, primarily a growing polarisation between the rich and poor, he cautions, “Both the UN and the World Bank have flagged this polarisation as a growing problem. We might see some political measures to limit this polarisation. One possibility is the advent of a Universal Basic Income, an idea that is currently being considered in Finland and Switzerland.

“If it does come, there will not be a retirement age because you will get the Universal Basic Income at every age,” he says.

Denmark is currently considering the idea of providing access to the State pension early for people worn out by hard physical labour, while others, say professionals or creatives, whose work is less taxing, could hold off before applying for the State pension, and so get a higher rate at a later stage.

The further we get from the industrial age, the more attitudes towards retirement are likely to change, he says. “People in creative industries, for example, tend to like their work. For them it is not just a means to get money, they find it interesting.”

Automation will give routine jobs to the robots, leaving only the interesting ones for their human overlords, he posits. “The trend generally over the past 150 years has been to reduce working hours. If this continues, we can expect to work less and have more time to enjoy the wealth we have,” he says. “And with the growth of free and inexpensive resources (delivered via the cloud) time might become the greatest luxury. In Denmark already we have seen unions successfully start to negotiate for more time off rather than for more money. Two-thirds of Danish workers have negotiated six- rather than five-week holidays.”

Another trend is longevity. “If you retire at 70 pretty soon you can expect to have another 25 years of life. Your kids could possibly expect to live even longer. If that is the case, retirement savings won’t last that long and public retirement funds won’t cover that either. We are going to have to increase retirement age to afford longer living.”

The whole notion of retirement is undergoing “massive transformation at the nexus of socio-economic change and technological disruption,” says Kyle Brown, a senior foresight strategist with Idea Couture, a strategic design and innovation firm in Toronto.

“Automation, information communications technologies and artificial intelligence are challenging the industrial economic model and even our knowledge economy, with innovations in process efficiency and cognitive capacity that are ultimately resulting in labour market displacement,” he says.

“At the same time, advances in life sciences are increasing human longevity. Most Western societies are also beginning to feel the consequences of the passing demographic bulge, with several states being forced to address an increasingly unfavourable age-dependency ratio,” he says.

This new 50+ is healthier and more active than ever, meaning they will likely work longer

“As a result, new ways of working are emerging, which require us to rethink and re-imagine the linear approach to education, employment, and retirement. Rather, these three states are becoming more fluid and dynamic, characterised by increased precariousness and task-based, project-oriented work that is supported by just-in-time lifelong learning – as opposed to just-in-case learning,” he says.

The idea of a second career represents an opportunity for passionate engagement after retirement that not only creates a sense of purpose for the elderly, but creates benefits for the wider community, he says.

The attitudes and behaviours of elderly populations today and in the future will be different than generations past. “This new 50+ is healthier and more active than ever, meaning they will likely work longer and actively participate in society to a greater extent than before,” says Brown.

“Having grown up in a time of relative economic prosperity – from a Western-centric perspective – their expectations for retirement will be wildly different than in the past, especially given their financial privileges and disposable income. There is a new silver economy emerging that ranges from functional products and services to transformative experiences,” he says. Looks like the future isn’t golden but silver.

www.irishtimes.ie 14/10/2017

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Women fear they won’t have enough to fund retirement

Large numbers of women are worried they will not have enough money when they retire, with fewer men concerned about a funds shortfall.

Most women are unsure of how much they will need for a comfortable retirement, according to research from pensions provider Aviva.

It showed a huge gender gap in Ireland when it comes to preparations for retirement.

But the survey, carried out among 1,000 adults by Ipsos Mori for Aviva, found that just 8pc of women say they are taking steps to ensure they have an adequate level of income during retirement.

Around a third of women say they are not setting aside money for retirement on a regular basis. Just 18pc of men are failing to prepare for retirement.

A quarter of women have given no consideration to how much they would need to live comfortably in retirement. The comparable figure for men is 14pc.Four out 10 women say they don’t understand pensions, compared to 27pc of men.

Head of life and pensions at Aviva Ann O’Keeffe said the gender pay gap was getting a lot of attention.

“But we also need to focus on the knock-on effect of this pay gap on pensions, given its implications for the welfare of our ageing female population.”

She said the gender pension gap was hardly surprising, given that women earn less than men.

“It is worrying that women are so unprepared and lacking information on how best to prepare for their retirement,” she said.

Ms O’Keeffe encouraged all workers to start saving as early as possible and to not opt out of any workplace pension scheme.

Reference: Independent.ie

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9 Financial Habits Every 30-Something Should Have


As a 30 something, the best time to start thinking about your retirement and future financial security is… well….yesterday.

Of course, it’s not the most exciting topic when you’re young and have to consider things like mortgages, weddings and children, which require more urgent financial attention.

The reality is, however, the sooner you embrace the, the better. Not only will it take one of those big ‘life admin’ weights off your shoulders, but an early start brings great benefits.

State pension age is on the increase (set to be 68 after 2028), as is our life expectancy. Irish men and women are expected to life to 78 and 82, respectively and surviving for that long on the current state pension personal rate of €230.30 per week, seems like an unimaginable stretch.

So if you’re new to the world of retirement planning and feeling a little bit more ready to get started, here are some things you can do now that your older self will thank you for.

  1. Know where you currently stand

Pensions seem complicated when you don’t know anything about them, but there’s plenty of information online and it’s always worth asking those around you too. The most important thing to know, when you’re getting started, is whether you have or are eligible for a pension and what the contributions are. If you are in the public sector, you’ll be covered by the public sector pension but if you work in the private sector, this may be more unclear. If you’re unsure, talk to your employer or HR department to understand your current position.

Calculator and notebook

If there is an option to join a company pension scheme, you should strongly consider this, as it’s basically free money for future you. Take an interest in the scheme and understand your contributions. It might automatically be set to a minimum of 1% of your earnings. If you feel like you can increase this, you should.

  1. Calculate and set a budget

Once you know where you stand, the next step is to figure out exactly how much you need to put away each month to secure the kind of comfortable future you want after retirement age. Irish Life has a very handy pension calculator which will take you through everything. All you need to know is your annual salary and basic information about your existing pension, if you have one.

It can tell you how much you need to save on a monthly basis to reach your goal. By having this information in front of you and knowing how much you need to save, the reality of retirement planning will seem a little bit easier to take on.

Set budget for retirement

  1. Set up a pension

No matter if you have all the savings in the world it’s still worth having a pension, as a pension receives income tax relief, if you’re eligible. This basically means you’ll pay less tax if you have money in your pension. For example, if you invest €100 in your pension, you’ll get €20 off your tax bill. And the relief is even greater for higher rate taxpayers.

If your employer is matching your pension contributions, you should contribute as much as you can to benefit fully from this.

  1. Pay off your debts

Retirement planning is not just about setting up and having a pension. Having control over your current finances will help stand you in better stead in later life.

If you have any debts, make it your priority to clear all of these before you do anything else. Start with the ones with the highest interest rates first as they’ll be costing you most, longterm. From there, try to avoid when possible, purchasing items on credit or getting loans that you don’t absolutely need.

online banking

  1. Ask for more money

It’s not a conversation that anyone wants to have but if you don’t negotiate your salary, you’re not only undermining your potential income but your savings too. Having an extra €100 or more per month to put towards your savings can make a significant impact on your financial security in later life.

  1. Save as much as you possibly can

Even though buying that new pair of shoes may seem more appealing, it is worth saving as much as you can, while you can – before you have to come to terms with the big life expenses such as mortgages and weddings and your money has to stretch much further.

Every time your wage increases, or if you manage to clear a monthly expense, put this towards your savings. If not, you’ll find you’re just unnecessarily spending this extra cash with nothing to show for it.

Save money - piggy bank

  1. Consider investing

For most people entering into the world of savings and investment for the first time, setting up a pension is often the first step. But once you have that set up, it might also be worth considering other investments to add a little bit extra to your pockets, so you can afford to put away extra for your retirement. Of course, with investment, there is greater risk but there’s also greater reward. We have some great investment information and resources at IrishLife.ie to suit investors of all types and levels of experience.

  1. Buy a home and buy wisely

We know, we know – in Ireland, this is much easier said than done, as the average age of first time buyers has risen to 34.

But if you have the chance to get a foothold on the property ladder, buying a home is a solid investment for your future, retired self. If you manage to pay it off well before retirement age, you’ll be able to save more and will have considerably less expenses. If you’re buying a house that you don’t currently want to live in, but want to rent out instead, consider if it may be somewhere you could comfortably settle later in life, for greater practicality.


  1. Talk to a professional

To maximise the potential of your retirement plans, it’s always best to talk to a professional who understands pensions, investments and savings inside out and can give you the best advice. At Irish Life, we have hundreds of thousands of pre-retirement pension customers in Ireland so we have a detailed understanding of how to cater for customers of varying needs and levels of expertise when it comes to finance.

As much as taking to friends, family members and colleagues can help guide you, discussing your situation and your goals with a professional will give you that extra bit of confidence in your decisions.

Reference: Irish Life