Pensions are a fantastic idea that you can't take seriously early enough.
They are a great way of gaining financial security and protecting your future. But they don't just make sense for that reason alone; pensions are extremely tax-efficient as any money that you save into a pension is exempt from income tax up to a certain limit. So as well as providing for your future, pensions allow you to give away less of your hard-earned money to the tax man. A real win-win.
So you’d think that most of us would therefore be fairly up-to-speed with how pensions work, right?
According to new national research on pensions commissioned by Bank of Ireland, almost half of us don’t fully understand how pensions work.
What’s more, almost 70% of people aged between 25 and 34 have yet to start their own personal pension, rising to over 80% for those aged 18 to 24.
This is worrying given that the State pension, at less than €250 a week, won’t be enough for most people to survive on. What's more, as the population of Ireland gradually ages and strains on the system increase, there’s a real fear that the State pension in its current form may not be around when those of us under 50 eventually retire! This means having adequate private pension cover is more important than ever.
The nationwide poll, carried out in October amongst 1,000 adults in Ireland, also found that:
For those who don’t yet have a private pension, the following were given as reasons:
Bernard Walsh, Head of Pensions and Investments, for Bank of Ireland said: “Bank of Ireland carried out this research to get a clearer view of the pensions landscape, and to better understand the reasons people save for the future and the barriers preventing them from doing so. What’s clear from the research is that there is a general lack of understanding of how pensions work, on what people need to do to set one up and how to achieve a better outcome. As an industry, we clearly need to get better at explaining how pensions work. Bank of Ireland has invested heavily in a Financial Wellbeing programme, making a commitment to help customers thrive by enabling them to make better financial decisions for themselves and their families."
The Financial Wellbeing Programme Bernard is referring to is the €5 million plan of activity over the next few years in schools and centres nationwide, launched by the bank back in March, which aims to help improve people's financial literacy, capability and confidence.
“While a good proportion of respondents have started their pension within a good timeframe, a similar number feel they may have started too late. Our message is that it’s never too late to start a pension and even small amounts which are increased over time can make a difference to your retirement. At this time of year it pays to think about starting a plan or modifying your existing one, and I would encourage anyone thinking of doing so not to put it off any longer,” Bernard adds.
Have you started contributing towards you own pension yet? If not, why? And how would you rate your pensions knowledge?
Get in touch and let us know!
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