The KBC Bank Ireland consumer sentiment survey for September 2020 contained a special supplement focused on consumers’ understanding, aims and actions in relation to their personal pension circumstances.
Speaking on the release of the survey, Austin Hughes, chief economist at KBC Bank Ireland who carried out the analysis noted ‘Irish consumers appear to have a well-defined view of a distinctly different life stage in retirement. However, the survey suggests the financial planning needed to fund that retirement is far less developed. It’s as though the future is another country that people don’t expect to visit for some time and they don’t see the need to have the ‘passport’ of a pension until just before they travel’.
Mr Hughes added; ‘For a range of reasons, including but reaching well beyond affordability, there is a significant gap between the resources, both in terms of finances and planning, that Irish consumers are devoting to pensions today and the retirement they desire tomorrow’.
Commenting on the results, John Gethin, Branch Manager, KBC Life and Pensions , noted ‘the survey results highlight a tendency to regard pensions as something that can wait while more immediate concerns around housing, education or holidays are dealt with. The reality is that early engagement in planning for retirement can make a huge difference, particularly as the survey finds that 35% of consumers expect a financially difficult retirement with only 1 in 5 believing that they will be able to fund the lifestyle they aspire to.
Among the key findings of the survey are;
Irish consumers have a very strong sense of what they want to do in retirement but are far less certain if they will be able to fund it.
- Taking up or spending more time on hobbies, travelling and spending time with friends and family are the favoured retirement outcomes, with only 3% of Irish consumers planning not to retire
- Only 21% of consumers expect to enjoy a financially comfortable retirement….
- ….while 24% expect retirement finances will be adequate….
- ….but 35% envisage financial difficulties….
- and 21% don’t know or haven’t considered the financial implications of retirement
Roughly half of consumers expect they will rely primarily on a State pension in retirement with a similar number envisaging a drop in their spending power when they retire
- 47% of consumers expect the State pension to be their main source of income in retirement while 18% will rely primarily on a personal pension and 15% don’t know or haven’t considered the issue.
- 53% of consumers think their spending power will drop in retirement with a fall of less than 25% the most common expectation
Only one in three consumers without a pension plan say they can’t afford one with a similar number saying they haven’t thought about it or don’t know enough about pensions
- Just 34% of consumers without pensions say it’s because they can’t afford one but another 16% say it’s because they have other financial priorities
- 23% say it’s because they haven’t considered getting a pension and another 14% say they don’t know enough about pensions
Buying a home and repaying the mortgage are more important saving priorities than a pension for most age groups
- 29% of consumers cite repaying borrowings as the most important priority when considering saving, while 22% prioritise buying or refurbishing a home
- Saving for a pension is the priority of 18% of consumers, broadly similar to the 17% citing saving to fund education
- Saving for a pension only becomes the number one priority for those aged 55 and over
Covid-19 financial hit fuels concerns that retirement may be delayed further
- 29% of consumers think they may have to retire later than they expected, while 37% see no impact and 31% are unsure
- Covid-19 financial concerns most pronounced among the under 35’s
- Some 15% say retirement plans already affected, with these adjustments most pronounced among those now at retirement age
Mr Gethin added; ‘the fact that the survey suggests that 29% of consumers fears that a financial hit from Covid-19 may mean they have to retire later than they expected underscores the need to build a pension buffer to deal with an increasingly uncertain future. The findings point to a need for consumers to engage more with their financial future to ensure they are ready for retirement.’
KBC Life and Pensions is a branch of KBC Insurance NV in Belgium. For more information see kbc.ie/lifeandpensions, your KBC App, or call KBC on 1800 51 52 53.