Less Than a Quarter of Irish People Have a Clear Financial Plan
A recent survey carried out by the PTSB has revealed that a shocking 24% of people in Ireland currently have a clear financial plan for retirement. With recent advertisements surrounding the My Future Fund scheme, it is evident that there is still a worrying undercurrent about the Irish population’s approach to their financial plan and retirement.
This is a shocking revelation for financial planners across Ireland, as it shows that even with constant advertising of both the immediate and future financial benefits of starting a pension, a growing number of ageing workers have yet to begin a pension fund. This will cause several issues with the 35-45 age group, who have yet to start once they reach the retirement age, as they are going to have a significantly different lifestyle in retirement, due to being unable to afford their ‘regular’ lifestyle.
As seen in the 2024 Irish Retirement Standards, a moderate pension standard, which will see the retiree have more flexibility and financial security, starts at €27,600 for single retirees, without a reliance on the state pension. If you are to retire without a pension fund in 2025, and are solely reliant on the state pension, you are looking at roughly €15,000, and this amount is only going to decrease further and further as more and more people will become eligible to claim a state pension with less contributing towards it. This will result in a shocking difference in lifestyles when you retire, as now you will have to manage your finances closely and restrict the lifestyle you were previously living.
While efforts were made with the My Future Fund scheme to help the Irish population that did not have a pension scheme in place, it seems that, with a current cost-of-living crisis, many people have either refused to join the scheme or are still unable to afford the contributions and continue with their lifestyle.
However, an even more pressing statistic from the report is that 14% of individuals have explicitly stated that they do not intend to plan towards their financial future or retirement plans. This is an extremely worrying statistic, as it shows the underlying issue of a lack of understanding towards financial planning, how simple it can be to start, and most importantly, the greater impact it will have on your future by not only starting it, but starting it sooner rather than later.
While the cost of living is getting increasingly difficult with each passing day, you can start your financial plan with simple beginnings:
One of the first steps we would recommend to our clients is to begin with a monthly tracker on your income and expenditures. By tracking what is coming in and out of your account, you can easily identify what expenditures are essential and what can be cut back or removed entirely. This simple step allows you to free up additional funds, which you can allocate towards a pension fund, savings account, or paying off loans you may have. This introduction to financial planning will not only help with financial pressure but can also allow you to take further steps in financial planning. While starting a financial plan can seem daunting, starting it will protect you in both the short and long-term of your life and ensure any sudden changes in the financial environment reduce the impact it will have on your situation.
And with the Finance Act coming into effect at the end of this year, a new cap has been introduced on how much an employer can contribute to a PRSA without triggering benefit-in-kind, which also means that an employer’s tax deductions for PRSA contributions will also be limited to this salary cap.
After getting this organised and paying off any other high-interest loans, you can begin planning for your financial future, as now you can approach this issue without having to worry about any recurring payments that may prevent you from investing in your future. After clearing off these loans, you can then begin working on a personalised action plan, which will help you navigate future situations, ensuring that you will be able to maximise whatever situation you face.
Investments are an often-talked-about area when it comes to financial planning and creating a financial plan. While every individual’s financial plan will be different, as Certified Financial Planners, we strongly believe that one of the most powerful tools for building long-term wealth is through investing. You can not only help grow your wealth, but you will also be able to achieve a greater financial future, allowing you to live a more comfortable retirement.
However, a clear message that we must get across to those looking to get into investing is to ensure that they are maximising their efforts in relation to their pension.
Another key factor for Irish workers to take into account is the possible introduction of a new form of savings account that is similar to either the United Kingdom’s ISA or Sweden’s ISK. While little is currently known about the current setup of the scheme, many financial advisors have come out and spoken about the essential guidelines that will be needed for this scheme to succeed in Ireland.
Of these guidelines, one of the most crucial things is a certain limit of tax-free earnings for the scheme. By having this scheme set up similarly to the Capital Gains Tax, not only are they limiting the overall amount of workers who will invest in the scheme, but the value of this scheme for the average individual is going to plummet immediately.
As Certified Financial Planners, we cannot understate the importance of starting your pension. Leaving it later in life is only going to further prevent the fund from growing in terms of compound interest on your investment, resulting in you earning less from your contributions. Another key benefit of starting a pension fund is the inherent tax benefits that come with your contributions.
If you are in need of expert, knowledgeable industry advice from a team of Certified Financial Planners, get in touch with Moore Wealth Management today
