Entrepreneurs, business owners and workers in Ireland are losing out on significant tax savings according to new statistics just published by Ireland's Central Statistics Office.
Entrepreneurs, business owners and workers in Ireland are losing out on significant tax savings according to new statistics just published by Ireland's Central Statistics Office. *The CSO statistics show that pension uptake in Ireland is just 54% on average meaning that up to half of Ireland's workforce may have no pension. The findings are crucially important for business owners at this time of year as they must file their tax returns by 31 October.
**An estimated 82% of businesses in Ireland are classified as small or entrepreneurial businesses. ***Additional research conducted by Hibernian Life & Pensions shows that 57% of Ireland's business owners and entrepreneurs see their business or their home as their pension fund instead of taking advice from their accountant or financial adviser on how to properly fund their retirement years.
Speaking about the findings, Mark Reilly, pensions development manager of Hibernian Life, said: "Because pensions are seen as having such a long time horizon many people, and particularly self-employed people, put off their pension planning until it is too late. This leaves them with a significant income drop in retirement. What most people overlook is that the weekly state pension is just €223.70 per week or less than €12,000 per year - and this is to cover all living expenses including food, health, light and heat, clothing and more.
"It is quite alarming to see that nearly half of Ireland's workforce are not investing in a pension. There really is a need for pension education among Ireland's business owners and workers to help them avoid the lifestyle changes that come with such a drastic drop in income."
However, the CSO findings were not all doom and gloom as the figures revealed a substantial increase in pension uptake among women. In 2002, 45% of female workers and 57% of male workers were investing in a pension and this year's figures reveal that 50% of female workers and 56% of males now have a pension.
The findings also establish a gap in pension coverage among certain occupations. For instance, nine out of ten workers in the public administration and defence sectors have a pension but only one out of four workers in the hotel and restaurant trade sectors have a pension plan.
"Overall these research findings reveal that a lot of Ireland's workers have a ‘here and now' attitude and regard retirement planning as an afterthought. By investing more in your retirement now, the more money you will have waiting for you when you retire. If Ireland's owners are to at least maintain their standard of living at retirement it is absolutely necessary not only to invest in a pension but to make sure your contributions are sufficient enough to meet your retirement expectations," said Mark Reilly.
"When you're young a few extra euros goes a long way. For example, at age 25 a contribution of €300 a month can grow to well over half a million euros when you retire. But if you decide to wait another 10 years before starting your pension the estimated size of your retirement income decreases by half. So the sooner you start saving for retirement the better", said Mark Reilly.
****Pension Maturity Values at National Retirement Age 65:
| Age | Estimated maturity value at NRA | Providing a yearly pension of |
|---|---|---|
| 25 | €679,059 | €37,114 |
| 35 | €332,135 | €18,567 |
| 45 | €145,161 | €8,299 |
Footnotes
* Central Statistics Office, Quarterly National Household Survey, September 2008
** Central Statistics Office, Report on Small Business in Ireland, May 2007
*** Fieldwork for research undertaken by Hibernian Life carried out during 2008 by Henley Centre Light Vision for Aviva.
**** Figures and table are based on the assumption that €300 monthly contributions are invested in Hibernian Horizon Plan, at 6% growth and 3% contribution indexation. Figures are for illustrative purposes only and are not guaranteed. Actual investment growth will depend on the performance of the underlying investments and may be more or less than illustrated.
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