Scuba diving in your 80s? Or your own drone? That’s why we all need pensions

The Government launched a new Roadmap for Pensions this week, promising some good news for pension savers and a commitment to maintain the State pension at 34% of average earnings. So, Government promises being what they are, we thought it was time for a chat with Jerry Moriarty, CEO of the Irish Association of Pension Funds, who tells us about more goodies that might be on the way.

The Roadmap for Pensions will give credits to home carers and take total PRSI contributions into account for pensions (instead of the current complicated yearly average approach). Happy?

(We’ve) been crying out for a simplification of pension and tax rules for some time. There are too many rules, which frustrate attempts to save for retirement. We are hopeful these reforms will deal with much of this unnecessary complexity. There’s widespread agreement that a universal retirement savings plan is imperative to ensuring our ageing population will not suffer from poverty in retirement.

It was also confirmed this week that every worker will be auto-enrolled in a pension from 2022. Please explain.

The idea is that anybody not in a pension scheme would be put in one. They can always opt out. Ireland should look to countries like New Zealand and Australia to learn from the well-governed and efficiently run auto-enrolment schemes that already exist in these countries. It’s also been in place in the UK for six years and the opt-out rates are really low. It’s all based on the power of inertia.

The Government has promised that those on low to middle incomes will receive financial support from the State and their employer. How will this work? Will there be a windfall?

The employer, employee and Government would contribute (in proportions yet to be decided). It could be 8% in total – 4% from the employee, 3% from the employer and 1% from the Government, perhaps.

And charges? Aren’t they outrageously high? A recent investigation by UK regulator into private pensions highlighted ‘complex products, a lack of customer engagement and barriers to switching.’ Same here surely?

With auto-enrolment there is an opportunity to set maximum charges which should help.

What would you say to half the people who don’t have pension?

You do not want to have your retirement plan based on the State pension (of around €238.30 a week). It’s affordable for anyone with access to an employers’ pension scheme. If the employer is contributing, the employee is actually turning down extra pay. Does that make sense?

Surely buying a house is more important for younger people?

Ideally you can do both. And one of the benefits of starting a pension early is you get a lot more benefits with long-term investment.

But shouldn’t we be able to access our pension fund nest-egg in an emergency? Wouldn’t that make it much more attractive?

Yes, that’s going back to basic psychology. It’s hard to promote saving money you won’t get for 40 years. If there was access for an emergency or for house purchase that would help. I wouldn’t be surprised if this was a feature.

Let’s face it, pensions are seen as ‘boring’. What attracted you to the industry?

Boring but important! I fell into it. I got sent to the pension department when in Irish Life. It can be quite interesting with all that’s going on at the moment. People want to do is help other people and you get to do that.

Wouldn’t it be more fun to ‘live fast and die young’, spending all your spare cash as soon as you get it?

A lot of people seem to think so. But the average lifespan is 82 to 83 and half of us will live longer than that. And you can really enjoy your retirement if you plan it. Midweek flights to Spain or Portugal are always full of pensioners who saved.

So what was your most expensive fun purchase, then?

I love to travel with my wife. I have had several once-in-a-lifetime holidays and I found I really enjoyed using a decent GoPro camera I bought for scuba diving.

What other little luxury would you like to treat yourself to?

I quite fancy a drone. I’ve seen some great new technology out there. It looks fab.