In a new survey issued today, by Bank of Ireland Life to coincide with the launch of their annual pensions campaign, it was revealed that 71% of the population do not understand the tax benefits associated with a pension.
Since almost half of the working population don’t have a pension plan in place, this new finding will be hugely significant to the Government who are currently trying to tackle the country’s pension crisis.
However on a more positive note, the research shows that 60% of people without a pension claim they can actually afford to contribute to one every month, even though they had not started one as yet.
Commenting on the research findings, Brian Sullivan, Head of Pension Sales, Bank of Ireland Life said; “It appears that awareness of the pension tax benefits is now the main barrier to pension take-up and not affordability as previously thought. Over 1.2 million people in this country took out an SSIA, which offered a 25% Government bonus, yet a pension can offer almost double this incentive through tax relief. There are specialist pension advisers in every Bank of Ireland branch who can explain the tax relief available simply, and set-up a pension in just one meeting.”
Brian Sullivan continues, “The best advice I can offer people who can afford to pay into a pension today, is not to put it off any longer. Starting a pension early with small contributions at the outset and then gradually building these up, can make a huge difference to the size of your pension fund in the long run. In fact, delaying by just 5 years could reduce your retirement fund by almost a third. And you’d be surprised, your salary may increase as you get older but your cashflow will actually lessen as increased personal and financial responsibilities place a much bigger demand on your disposable cash.”
Additional findings also revealed:
Ø The biggest group of people (70%) without a pension but who could afford to pay into one were the 25 – 35 year olds – the ideal time to start a pension.
Ø Almost 4 in 10 respondents claimed they could afford to make a monthly payment of €100 - €200 to a pension.
Ø Only 6% of people felt they could afford to make a monthly payment of €300 - €500 to their pension.
We believe that a greater majority of people will be able to make monthly payments of €300 - €500 into their pension once the SSIA scheme finishes. Afterall, many people don’t realise that a monthly contribution of €488 by a working person on the higher rate of tax would only cost €254, the maximum SSIA payment,“ added Brian Sullivan.
The tax benefits of starting a pension are particularly relevant to the self-employed, who must file their annual tax returns before the 31st October this year. Previous research conducted by Bank of Ireland Life, indicated that just one third of the self-employed contributed to a pension. This is very worrying especially when you consider that the number of small business owners in Ireland has increased by over 68% in the last four years alone and accounts for over 10% of the working population. The self-assessment tax deadline of 31st October provides sole traders with the opportunity to cut their annual tax bill by nearly half (42% for those on the higher tax rate) if they contribute to a pension.
