People eligible for pension auto-enrolment are urged to “pause” before considering to opt-out from the scheme.
The State-sponsored scheme, also known as MyFutureFund, was designed to cover people without work-provided retirement plans and was launched in January. It impacts 770,000 people.
From July 1, most of them will be able to opt-out from it, with the window open for two months.
It is “giving individuals who may be under pressure financially the opportunity to opt out or they may have personal provision elsewhere sufficient to cover their retirement,” Caroline Rowan, head of retirement solutions at risk management firm Aon Ireland, told RTÉ’s Morning Ireland programme.
Ms Rowan argues that “it’s a very important decision” that may have “a long-term impact on their quality of life in retirement.”
Those who choose to opt out, she explains, will be missing out not only on their own contributions, which is 1.5% of their gross salary, but also the top-ups from their employer and the State.
“All of that stops and it will stop for two years, after which you’re going to be auto-enrolled back into the scheme anyway. So, you’re going to miss out on the power of compounding over that two-year period as well,” she stated.
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Women and minority groups are among those benefiting most from the scheme, designed to provide a basic level of income on top of the state pension.
“The broad pensions gap for women is about 35% relative to men and that’s because of working patterns and women’s employment being interrupted as a result of career breaks, maternity leave and their earnings also being impacted,” said AON’s expert.
Addressing concerns of MyFutureFund possible not being sufficient to see one through retirement, Ms Rowan said that “it’s certainly better than relying purely on the state pension … but it should be used in tandem with other retirement planning and other savings.”
