Q. I work in a 120 employee company in north Dublin on a decent € 46,000 income. I am 41 years old and no pension – I’m single and have been having a good time ! The boss says pension auto-enrolment is coming in September 2025 and I should wait til then before I start thinking about retirement planning. About 35 of the staff have their own independent pensions already and I am wondering should I wait and what will happen to those 35 people then. Thanks Jimmy – Clonskeagh Dublin 14
A. Thanks Jimmy. Those 35 colleagues were spot on. I would hate to have to rely on the government in a minimum 27 years’ time ( it will probably be age 75 by the time you retire ) to pay my State pension if it still exists at that time. We will be approaching 1.8million people over the age of 66 whereas now we have c. 800,000 over that age. Today for everyone retiring we have 4 workers, but in 2050 there will be 2 ! Auto-enrolment should have come in at least 20 years ago. This is where the employer is forced to set up and contribute to YOUR pension while you also must contribute. The amounts are pathetic – after 10 years you’ll contribute6%, the employer 6% and the government 2% – 14% whereas you can NOW invest up to a minimum 25% of your net relevant earnings EVERY year til retirement. So at your age you could be contributing € 958.33 per month ( 25% of your monthly gross) and being on the higher rate of tax you would be saving a whopping € 383.33 each month in tax relief. You don’t have to be a mathematician to work out at 41 years of age you are going to be well short of what you currently earn when you are 68. You are never too young to start a pension and it is quite easily the best investment you could get into. The big question for all of us is can we afford it ? That’s where budgeting comes in but I would urge you to start Jimmy now and not wait til 2025. Those 35 colleagues will be looking forward to their employer’s contributions enlarging their pension pots – but not by much !