Ireland: New Aviva research reveals €20.2 billion annual gap in Irish pensions savings

• Analysis shows that average person in Ireland needs to save an additional €9,100 per annum to live adequately in retirement
• Total European Pensions Gap stands at €1.9 trillion per annum.
  
  
• Current analysis shows that Ireland’s workforce will face a seriously reduced standard of living on retirement, with a current average savings gap per person of €9,100 per annum
• As our population ages, we are facing a future retirement dilemma – will we need to work longer, save significantly more now and/or accept a lower standard of retirement living?
• Aviva makes recommendations on tackling this issue and building a more secure pensions platform for retirement.

Ireland’s annual pensions savings gap, the difference between what is currently being saved and expectations for retirement, stands at €20.2 billion, the equivalent of an average €9,100 per person per annum of working age. This is among the findings of the most comprehensive analysis of Europe’s retirement landscape to date, by leading European insurer, Aviva. The gap across Europe as a whole stands at €1.9 trillion per annum.

At an individual level, only the UK and Germany have higher average savings gaps, with a deficit of €12,300 per person in the UK and €11,600 in Germany respectively.  The size of the gap varies for each individual depending on their age and their current pension provision, with those in Ireland who are 20 years old facing an average gap of €1,700 per annum and those who are 60 years old facing a gap of €21,100 per annum. This clearly shows that starting to save at a younger age establishes a stronger and more manageable footing for retirement income.

To put the €9,100 in context for individuals, the average pension savings gap in Ireland is the equivalent of 34% when measured in terms of disposable income. 

Aviva’s research assessed the gap between the savings that people retiring will need in order to maintain their standard of living in retirement* and the actual pension provision they will have. It indicates that without action today to save more for retirement, many EU citizens will be forced to accept a combination of:

• Working during retirement. Already, some countries across Europe are expecting to see the number of people working beyond retirement age double in the next 10 years.
• Retiring later. Increasing the retirement age would help reduce the pensions gap but it will not solve the problem on its own
• Accepting a significantly reduced standard of living.

In addition to this, by 2051, 50% of the current Irish population will reach retirement age, a threefold increase in the number of people over 65 today. This means that the number of people working to fund those who are in retirement will drop from 6:1 to just 2:1, putting another huge strain on the economy and on people starting their working lives today.

Aviva’s research outlines recommendations to address the pensions gap both in Ireland and at a European level:

Aviva calls on policy-makers to work in partnership with the private sector to create a greater retirement savings culture and build a more secure platform for individuals to plan for their retirement through:

• Issuing of annual pension statements to all citizens that provide an individual with a consolidated view of all their different sources of pension provision including their projected total pension. This is recommended to raise the visibility of each citizen’s pension provision and to encourage them to take action to address any expected shortfall.
• Governments to review the effectiveness of existing incentive schemes for pensions saving, their impact and whether they effectively support the reduction in the pensions savings gap
• The creation of a European Quality Standard for Pensions to demonstrate the quality and security of products, facilitate comparability and increase consumer confidence.
• Establish a European Pensions Savings Target; variable by country and calculated as a percentage of GDP.

Jim Dowdall, CEO of Aviva Ireland, said: “Aviva’s study of the scale of Europe’s pensions funding issue is published at a time of recession in Ireland, falling consumer confidence, property market collapses, rising unemployment and increased cost of borrowing. The need for prudent and long-term financial planning has never been more pertinent or more necessary.

“For the first time, we now have a complete understanding of the scale of the gap across Europe and have identified that in Ireland, on average, people need to save an additional €9,100 per annum to enable them retire with an adequate standard of living. Closing this gap can be achieved by a combination of factors, such as increased savings, raising the retirement age or indeed adjusting our expectations for our lifestyle in retirement.”

“The issue of inadequate pension provision isn’t new but this research will help inform debate and act as a catalyst for action.  It’s time to do things differently and consider a partnership approach between government, stakeholders and the insurance industry with a shared objective to develop a stronger retirement savings culture that will help safeguard our collective financial future. We need to ensure a widespread understanding of the scale of the problem, and encourage individual responsibility to tackle it. A practical combined public sector / private sector approach to tackling the issue has become is imperative.”

“Our recommendations for discussion include creating a European Quality Standard for Pensions, reviewing national measures for encouraging saving, issuing regular pension statements to every EU citizen and establishing a Pensions Savings Target for each country. Taking this approach will help build a more secure platform for individuals to plan for their retirement.”

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* a figure set as 70% of final salary by the Organisation for Economic Co-operation and Development

Enquiries:

Grayling Public Relations
Lisa Carroll / Catherine Walsh
087 289 1277 / 087 268 9532

Aviva Ireland
Ruth Burnside 
Group Communications Manager                 
087 996 7496                                                 

Alan Tyrrell
Group Media Relations Manager
086 850 8673

Notes to editors:

• Copies of Aviva’s report “Mind the Gap – Quantifying the Pensions Gap in Europe”, a selection of individual country reports and technical details can be found at www.aviva.com/europepensionsgap

Aviva’s research consists of three elements:

1. Quantification of the Pensions Gap, conducted in association with Deloitte. The work is a detailed analysis to quantify the annual retirement income gap and the capital shortfall at retirement.
2. Calculation of levels of non-pension assets. Data to size non-pension assets was sourced from a global model of personal financial assets developed by Aviva in conjunction with Oliver Wyman.
3. Investigating consumer attitudes to saving. Aviva’s Consumer Attitudes Survey, undertaken for Aviva by The Futures Company and now in its seventh year is a global quantitative study of consumer attitudes to topics including risk, advice, investment and retirement.

A summary of the savings and retirement income gap for individuals retiring 2011-51 per person and country totals. 

About Aviva
Aviva is the world’s sixth largest* insurance group, serving 53 million customers across UK, Europe, North America and Asia Pacific. Aviva's main business activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion at 31 December 2009.

The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.  Follow us on twitter: www.twitter.com/avivaplc

* based on gross worldwide premiums at 31 December 2009