THE latest PAYE taxpayer survey from leading tax refund specialists Taxback.com has found that, in a country where pension coverage is worryingly low, the vast majority (84%) of people would be in favour of an auto-enrolment type scheme.
The Taxback.com survey asked 800 taxpayers throughout the country their view on a State supported a retirement savings scheme to emulate a similar operation in Australia.
Barry Flanagan, Senior Tax Manager at Taxback.com commented on the findings,
“Commentators have been suggesting for years that Ireland is facing a “ticking timebomb” when it comes to pensions. The latest Census data demonstrates that we have an ageing population — there are now 296,837 males and 340,730 females aged 65 or older in Ireland. CSO data shows that by Q4 2015, just under half (47%) of all workers aged between 20 and 69 years had a pension (occupational pension, personal pension or both).
What it comes down to is the fact that more and more people are going to end up relying on the State pension in retirement — and the crux of it is that the State will not have the financial capacity to accommodate this. As a result, many private sector workers in particular could experience either a massive financial shock at retirement.
As our new Taoiseach recently put it in the Dáil: ‘The rate of supplementary pension coverage in Ireland is estimated at only 35% of the working population when the private sector is considered in isolation.
“If measures are not taken to ameliorate this low rate of coverage, many future retirees will suffer potentially significant unwanted reductions in their living standards on reaching retirement.
“Despite considerable efforts over many years to incentivise voluntary pension participation, the purely voluntary approach is not achieving the desired goal of increasing coverage. Therefore, it is my intention to bring forward proposals for an auto-enrolment retirement savings system.”
Taxback.com contend that both the State and the individual have a responsibility for ensuring that they are provided for in their later years, which essentially means that more people need to have a private pension in place.
Barry continued: “If you look to Australia you will see how they have addressed similar issues — they have had various forms of compulsory pensions in the form of superannuation schemes in place for decades - meaning that today approximately 71% of people over 15, and 85% of people in the 25 to 54 year age groups have pension coverage.”
The Taxback.com survey asked respondents: “In Australia the equivalent of 9.5% of a person’s salary is contributed by their employer into a fund for their retirement each month — would you support a similar system in Ireland — even if it your salary would be lower?”
Yes definitely – they should put in even more 26%.
Yes – seems like a good idea % 36%.
Yes but not as much as 9.5% 22%.
Barry explained: “The results were pretty definitive — there would be widespread acceptance of a compulsory pension savings scheme in Ireland, though there may be some issues to iron out surrounding contribution rates.
“The CSO pension report found that 22% of respondents said the reason they don’t have a pension is because they hadn’t gotten around to it. The establishment of a superannuation type scheme could overcome the issue of inaction immediately.
“From dealing with people claiming tax refunds on a daily basis we know that apathy is a big deterrent in apply for tax refunds. People often have the best of intentions but for one reason or another they let years and years go by before they finally get around to applying for what they are owed for the taxman. It may well be a similar situation with pensions.”