Download IF yOu sIMPLIFy IT, THey WILL JOIN

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Figure 1
Respondents Knowledge of
Current Tax Incentives for Pensions
STRONG KNOWLEDGE 7%
SOME KNOWLEDGE 19%
DO NOT KNOW 16%
LITTLE KNOWLEDGE 25%
NO KNOWLEDGE 33%
“The results suggest that there is a lot
that can be achieved to boost pensions
coverage by simplifying the current voluntary
system rather than introducing mandatory
pensions,” commented Patrick Burke,
Chairman, IAPF. “It also shows that there
are sector specific needs for improvements
in coverage levels and that these sectors
should be monitored to determine whether a
simplified incentivisation basis can achieve
pre-determined targets.”
Launch of an Irish association of pension funds report on attitudes of employees in the services
sector to pensions -Maurice Whyms (IAPF Benefits Committee) and Derek Wogan (Commercial
Manager, Smurfit Marketing Development Programme at UCD).
IF YOU SIMPLIFY IT,
THEY WILL JOIN
A
new study of butchers, florists and
hairdressers has found that they
are more likely to set up a pension
if the monetary benefits were simplified.
The study, commissioned by the Irish
Association of Pension Funds (IAPF),
was conducted by the Smurfit Graduate
School of Business at UCD amongst 170
respondents.
Almost 60% of those surveyed said they
had little or no knowledge of how current
tax incentives worked for pensions. The
survey also found a split down the middle
in support for a mandatory pensions
option. The sample of butchers, florists
and hairdressers was selected because it
was found that the services sector is under
represented in pensions coverage.
The survey found that 86% of those
without a pension would start one if the
Government introduced a simple scheme
whereby it contributed €1 for every €1
saved. 91% of those with a pension said
that they would increase their contributions.
Almost 40% of those without a pension
contributed to an SSIA.
The survey also suggests that pensions
coverage would increase significantly if tax
relief on pension contributions was available
at the higher tax band for all. Almost two
thirds (62%) of those without a pension
said they would be more likely to establish
a pension if tax relief was available at the
higher rate of 41%. At present, those on
lower incomes only get tax relief at the
20% band.
He added, “We have very strong examples
of sector specific solutions to low pensions
coverage illustrated for example by the
construction industry’s arrangements,
and it may be preferable to target our
responses on a sectoral basis rather than
introducing a response across the board
that would bring the better pensioned
sectors down to the level of the lowest
common denominator.”
HOT POTATO
“There is a deep split in attitudes to the
introduction of mandatory pensions,”
commented Derek Wogan of UCD. “This
study suggests that it could be a hot
political potato to introduce. The recent
controversy in the UK following the former
Chancellor’s earlier changes to the pension
system there demonstrates the importance
of achieving consensus amongst the social
partners in any pensions developments and
the proposed Green Paper will be a first
step towards that.”
The report states, “There was an even split
between those who approve and those
who disapprove of a compulsory pension
contribution of five percent. Although there
was an even split between these positive
and negative responses, there is a higher
Autumn 2007
irishpensions
25
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proportion of respondents who strongly
disapprove than those who strongly approve.
This would therefore indicate that this type
of incentive could come up against some
strong opposition from the public”.
The survey found that the main reason for
not having a pension was that respondents
‘have not got around to setting one up’. “It
could not be inferred that the majority reject
the concept of a pension but rather it is not
a high priority at their current life stage,”
states the report. Almost one in ten (9%)
said they could not afford a pension.
A quarter of all respondents said they
expected their source of income in retirement
would come from the sale of property while
15% said they intended to rely on other
savings or assets.
Patrick Burke of the IAPF said that the
services sector study emphasised that solving
the pensions problem was not just about
delivering greater coverage but adequate
pensions. Almost a quarter (23%) of those
with pensions save 5% or less of income.
He said that when it is considered that the
greatest number of respondents (35%) said
that they plan to use their personal pension
as their main source of income in retirement,
this level of contribution is unlikely to meet
their expectations of an adequate income.
“Alarmingly, 27% don’t know what proportion
of salary they are saving. There is a risk
that people are lulled into a false sense of
security. Just because you contribute to a
pension does not mean that you will have
sufficient income in retirement.”
He said it was also an issue of concern that
16% of respondents expected the State
pension to be their main source of income
while another 16% did not know how they
would fund retirement. Despite this almost
half of respondents (49%) would like to
retire before they are 60.
67% of respondents said that they would
set up or contribute more to a pension if
they were able to draw down a quarter of
it at age 45.
Figure 1 Reasons for not Contributing to a Pension
Figure
Figure 1
1 Reasons
Reasons for
for not
not Contributing
Contributing to
to a
a Pension
Pension
45%
Have not got around to Setting One Up
Have
to
Setting
One
Have not
not got
got around
around
to Sale
Setting
One Up
Up
Rely on
of Property
10%
Rely
Sale
Rely on
on Afford
Sale of
ofa Property
Property
Cannot
Pension
10%
10%
9%
Cannot
Afford
Pension
Cannot
Afford aa Pension
Rely
on Partner's
9%
9%
7%
on
Pension
Rely
on Partner's
Partner's
Pension
Have otherRely
Savings
and Investments
7%
7%
5%
Do not
Believe
Good Way
Have
other
Savings
and
Have
otherPensions
Savings are
andaInvestments
Investments
of Saving
Do
not
Believe
Pensions
are
a
Do not Believe Pensions are a Good
Good Way
Way
Do not Understand of
Pensions
Saving
of
Saving
Do
Understand
Do not
notRely
Understand
Pensions
on StatePensions
Pension
4%
5%
5%
4%
4%
4%
2%4%
4%
2%
2%
Rely
Pension
Rely on
on State
State
Pension
Do not
Know
13%
13%
13%
13%
Do
Know
Do not
not Other
Know
Other
Other
13%
Base: 82 (Respondents who do not have a pension) Multiple13%
Response Allowed
Base:
Base: 82
82 (Respondents
(Respondents who
who do
do not
not have
have a
a pension)
pension) Multiple
Multiple Response
Response Allowed
Allowed
Figure 2 Pension Contribution as a Percentage of Annual Salary
Figure
Figure 2
2 Pension
Pension Contribution
Contribution as
as a
a Percentage
Percentage of
of Annual
Annual Salary
Salary
1%-5%
23%
1%-5%
6%-10%
1%-5%
irishpensions
Autumn 2007
23%
23%
14%
6%-10%
11%-15%
6%-10%
10%
11%-15%
16%-20%
11%-15%
10%
7% 10%
16%-20%
21%-25%
16%-20%
1%
21%-25%
>26%
21%-25%
1%
2%
1%
>26%
Other Known as a Monthly
Sum
>26%
2%
2%
14%
14%
7%
7%
16%
16%
16%
Other
Monthly
Sum
not Know
Other Known
Known as
as aa Do
Monthly
Sum
27%
27%
27%
Do
Do not
not Know
Know
Base: 88 (Respondents who have a pension)
Base:
Base: 88
88 (Respondents
(Respondents who
who have
have a
a pension)
pension)
Figure 3 Sources of Income Retirement
Figure
Figure 3
3 Sources
Sources of
of Income
Income Retirement
Retirement
35%
Personal Pension
25%
Personal
Pension
Sale of Property
Personal
Pension
Sale
of Property
State
Pension
Sale
of
Property
16%
Income/Sale ofState
OtherPension
Assets
State
Pension
16%
15%
16%
Income/Sale
of
Personal
Savings/Investment
Plan
Income/Sale
of Other
Other Assets
Assets
Personal
Plan
Company Pension
Personal Savings/Investment
Savings/Investment
Plan
Company
Pension
Do not
Know
Company
Pension
Do
Know
Do not
not Other
Know
12%15%
15%
8%
12%
12%
8%
8%
6%
Other
6%
Other
6%
Base: 170 (All Respondents) Multiple Response Allowed
Base:
Base: 170
170 (All
(All Respondents)
Respondents) Multiple
Multiple Response
Response Allowed
Allowed
26
45%
45%
16%
16%
16%
25%
25%
35%
35%