Beware of the pension time bomb
THE world and her mother knows we have a pension problem. The retired population will grow from around 742,000 in 2022 to 1.9million in 2051…nearly three times our numbers today.
We are also living longer, staying healthy and need funding to stay alive.
Therein lies the problem – for every person who retired in 2021, there were five workers who were funding their State Pension (€253.30 per week and via Budget 2023 yesterday an extra €12 per week to €265.30). In 2051, there will only be two workers contributing to the Exchequer funds.
Amid cries of “let’s do something about it”
25 + years ago, the government last year finally decided to deliver auto-enrolment starting the end of 2023 (if not deferred again) where employers and employers MUST contribute to an employee pension with all sorts of conditions and back-outs.
It is not enough, not by half, so the deferred pension was introduced pre-Budget this month.
Basically you do not collect your pension when eligible and instead you defer up to four years to age 70 which at that point you will receive an extra € 61.70 per week into your weekly pension.
Inflation
This is a mathematical decision …live to at least age 86½ and it’s worth it. This also assumes firstly you are going to live well in excess of 86½ and to make it really worth your while a lot more years.
Secondly, you have income for those years from 66 to 70. Raging inflation, huge energy hikes and the cost of living has particularly affected the elderly so it is likely the current state pension in coming years will be increased as seen in yesterday’s Budget – question is will the deferred pension (currently €315 per week at 70) be given the same increases pro rata ?
Three other bands were introduced for those wishing to defer their pension. If you retire at..
●67 you’ll get €266/week (an extra €12.70/week)
●68 you’ll get €281/week (an extra €27.70/week)
●69 you’ll get €297/ week (an extra €43.70/week) The pension time-bomb is not going away and while other more pressing crises take priority, pensions will be back again. What I can say for sure is do not depend on the State Pension – more than half the country have nothing else.
If you are in a position to start a pension, any pension, now is the time to do it. It is the best investment in Ireland as the government refund you €20 or €40, depending on your tax rate, for every €100 you invest. So you are up 20 or 40 per cent respectively. Worth reviewing.