In every issue of The Bottom Line, we ask students for their thoughts on a particular topic. This month, we want to know: What do you think of pension auto-enrolment?
Becky Maye
PwC
Many young professionals may not view pension planning as a priority while they navigate other challenges. Many graduates will prioritise their professional exams, housing, and social or sporting commitments. As such, they may not even know of the existence of this scheme.
The new pension scheme operates as an opt-out, lessening the burden of those aged between 23 and 60 who earn over €20,000 but haven’t already enrolled in a pension scheme. It allows a foundation to be laid where an individual may later decide to enrol in a pension scheme while simultaneously allowing those who decide not to opt into a pension scheme access to a sum upon retirement that has accumulated over the years.
Investing in a pension scheme is essentially a tax-efficient investment into your future but it may be seen as an onerous task for many young professionals. The auto-enrolment scheme allows this view to be altered and provides a system where the burden is lifted.
Eoin Hartnett
KPMG
The auto-enrolment pension scheme is a semi-mandatory retirement savings system expected to be introduced in Ireland in January 2025. It’s a system whereby every €3 an employee contributes to their pension will be matched by their employers. In addition to this, the state will top it up with a further €1. What’s unique about this system is that it is an opt-out system rather than an opt-in one.
So, any employee between the ages of 23 and 60, not already on a pension scheme and earning over €20,000 per annum, is automatically enrolled.
Personally, as a 24-year-old six months into my graduate contract, I see this as a huge positive.
After 19 years in education, and only fresh out of college, there is a lot of change when you enter the working world that you have to deal with, and realistically, when you’re getting started, all your focus is on getting up to speed with the work and getting used to the working environment. Your pension is the last thing on your mind.
It would probably be another five or ten years before I would even think about it. Instead, now, in five or ten years, when I try to put a more comprehensive pension plan in place, I will already have accumulated a tidy lump sum upon which to build. I think that is the true benefit of this scheme, how, with minimum fuss, it helps set a foundation. A foundation that otherwise might not have been laid until years later.
Conor Flynn
EY
Retirement planning is generally not a priority for young workers in their 20s and 30s. This is unsurprising given the other immediate challenges facing young people, such as access to housing, high rents, and the rising cost of living.
A CSO 2023 survey stated that only 32 percent of workers aged between 20 and 69 were signed up to a private pension. As a result, many workers would be solely dependent on their State pension (approximately €13,500 pa) upon retirement.
This presents a major challenge for Ireland. An ageing population and rising life expectancy mean that a lack of corrective action, such as auto-enrolment, would result in a significant future burden on the Exchequer.
It is critical that we reshape our thinking around pension and retirement planning. Pension contributions can no longer be regarded as an unnecessary cost but rather a tax-efficient investment in our future!
LOADING...