According to Stephen Lawless, a pension consultant at CPAS, the issue with retirement in Ireland isn’t a lack of understanding, but rather the ability to afford it. Lawless highlights that despite high participation rates in pension plans, many Irish workers are still facing a significant gap in their retirement savings. This gap is further exacerbated by the rising cost of living, which leaves many individuals struggling to allocate sufficient funds for their future.
The Cost of a Comfortable Retirement
A recent report by Royal London found that Irish workers believe they need an average of €40,860 per year to enjoy a comfortable retirement. This figure is strikingly similar to the €43,200 annual expenditure estimated by the 2024 Irish Retirement Living Standards (IRLS) report for a couple’s comfortable retirement. The alignment between worker expectations and expert analysis shows a clear understanding of retirement needs, yet the challenge remains in achieving these financial goals. The IRLS report further breaks down these costs, showing that a significant portion is allocated to maintaining a quality of life that includes leisure activities, healthcare, and financial security.
The IRLS report defines a comfortable retirement as one that allows individuals to take holidays, pursue hobbies, maintain health insurance, and handle unexpected costs. To achieve this, a 30-year-old earning €61,908 annually would need to save €1,135 per month, assuming they also receive a full state pension. Delaying savings until age 40 increases this amount to €1,754 per month.
These figures are based on a retirement age of 66, but a Royal London survey from March 2025 revealed that nearly 72% of respondents hoped to retire between the ages of 50 and 60, further widening the gap between savings and retirement goals. The earlier retirement aspirations highlight the need for even more aggressive savings strategies, which are often unattainable for many due to current financial pressures.
The Pension Gap
Despite these clear financial requirements, Ireland’s pension replacement rate is significantly lower than the EU average. According to KPMG, for every €100 earned during their working life, Irish private pensions replace just €36 in retirement income, with a heavy reliance on the state pension. This disparity is partly due to the historical shift from defined benefit schemes, which guaranteed a specific retirement income, to defined contribution schemes, where the individual bears the risk of investment performance. The transition has left many workers uncertain about their future financial security.
Interestingly, Ireland’s participation rate in voluntary pension plans is relatively high at 66%, exceeding levels in several European countries. However, the issue lies in the adequacy of these savings. Many Irish pension savers are contributing at levels that won’t generate the retirement incomes they desire. This inadequacy is compounded by the fact that contributions are often made inconsistently or at the minimum required levels, which are insufficient to meet long-term needs. The high participation rate, therefore, masks the underlying problem of under-saving, which is driven by both financial constraints and behavioral factors.
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Affordability and Inertia
The primary barrier to adequate retirement savings is the cost of living. When non-pension holders were asked why they hadn’t established a pension, affordability was the most common concern. Among those aged 45 to 54, 55% stated they couldn’t afford a pension, a sentiment echoed across all surveyed age groups. This demographic is particularly vulnerable as they are closer to retirement age and have less time to recover from financial shortfalls. The pressure to meet immediate financial obligations often leaves little room for long-term savings, creating a cycle of financial insecurity.
Rising energy bills, healthcare costs, and insurance premiums further exacerbate the challenge of saving for retirement. Additionally, inertia plays a significant role, with many respondents without pensions admitting they had simply “never got around to it.” This procrastination is often fueled by the complexity of pension products and a lack of immediate consequences for not saving. The psychological barrier of starting a pension plan, combined with the overwhelming nature of financial planning, contributes to the delay in taking action. Furthermore, the lack of financial literacy among some individuals makes it difficult for them to work through the pension system effectively, leading to further inertia.
In a similar vein, Ireland’s historical reliance on defined benefit pension schemes, which guaranteed a specific income in retirement, has given way to defined contribution schemes, where the onus is on the individual to save enough. This shift, combined with the rising cost of living, has created a perfect storm for retirement savings. The transition has placed a greater burden on individuals to make informed financial decisions, often without adequate support or guidance. As a result, many workers are ill-prepared for the financial realities of retirement, leading to a growing sense of insecurity about their future.
Addressing the Challenge
Lawless emphasizes that while Auto-Enrolment is a positive step, it’s not a silver bullet. The government must also tackle the broader cost-of-living pressures that hinder households from building adequate retirement savings. Until these fundamental affordability issues are addressed, Ireland’s retirement income challenge will persist. Auto-Enrolment can increase participation, but without addressing the underlying financial constraints, it may not significantly improve retirement outcomes. The policy needs to be complemented with measures that reduce living costs and enhance financial literacy to ensure that individuals can save effectively for their retirement.
The CPAS team, specializing in the construction sector and related industries, offers qualified pension consulting services. They can assist professionals in reviewing their pension plans to ensure a more secure retirement. By providing tailored advice and strategies, CPAS helps individuals work through the complexities of pension planning, ensuring that they are on track to meet their retirement goals. For more information, interested individuals can contact Stephen Lawless at [email protected], where they can receive expert guidance to secure their financial future.
