Review Investment ‘Glidepath’ Of Your Pension Benefits
Contributions for selfemployed individuals and professionals will be varied this year as some sectors have been impacted financially by the pandemic more than others. This will inevitably lead to a slowdown in pension top-ups by those working in certain sectors.
However, Declan Maher, Head of Corporate Pensions and Risk with Bank of Ireland Life, notes that lockdown earlier this year gave many people an insight into what life ‘without’ work looks like, and that planning and appropriate action should be taken now for the stage when life ‘after’ work in retirement becomes a reality.
“Our message to such individuals is to ensure that proactive management and review of their retirement planning journey continues, even if it means a temporary cessation or reduction of pension contributions for 2020,” says Maher.
“This would include a review of their investment strategy and the appropriateness of the level of risk, or lack of, in meeting retirement income expectations. Or the consolidation of their pension pots, to ensure a complete and holistic overview of their pension benefits in place.”
Declan Maher, Bank of Ireland Life
Maher is concerned about the government’s slow progress on introducing pension auto-enrolment for all employees aged between 23 and 60 earning above €20,000 per year. Originally it was proposed that contribution levels would be 6% from employees, 6% from employers and a 2% direct contribution from the state. These contribution levels would be phased in over six years, but last October the government signalled that the phase-in period would stretch to ten years.
“The two-thirds of private sector employees who have yet to make adequate provision for their retirement can ill afford to waste another four years in doing so,” Maher explains. “Many countries included a bedding-in period when they introduced AE to allow those new to pension savings become accustomed to the concept. However, with the onset of Covid-19, the deferral of these costs to employers over a longer time period will be particularly welcome.”
Maher believes it is good policy that all employers should be compelled to pay into staff pensions. “We can’t ignore the financial pressures that employers are facing given the challenges of Covid-19 and Brexit.
“However, when employers pay into their staff pensions as a certain percentage of salary, it becomes a really rewarding benefit that significantly improves the financial wellbeing of employees. It also supports the employer in terms of their talent recruitment and staff retention strategy.
“Bank of Ireland Life would see the matching 6% of salary as the base contribution level for occupational pension schemes that we administer for employers. Other schemes are often designed differently, with contribution levels in excess of this, either based on employee service, seniority or both, rewarding loyalty of tenure and career progression.”