Let’s be honest – the last thing you’re thinking about in your twenties is retirement. (Yes, you might dream about having the hard graft done and panning out on a beach somewhere – but actually planning for retirement? No.) However, it really is a case of the sooner the better. You may be quicker to act if you heard that by inaction, you’re turning your back on free money.
You are.
Research carried out by Mercer has shown that almost 70 per cent of employees under the age of 30 in companies that offer a pension scheme are losing out by not securing contributions by their employers to their defined contribution (DC) pension schemes.
Many employers providing occupational DC pension schemes make contributions toward employees’ retirement. However, employees are losing out on an estimated €80 million of these contributions nationally every year. Even to those of us terrible at math, it’s easy to see that’s a major sum to miss out on!
To put it very plainly, one year of not availing of your employer-provided DC pension scheme could cost you around €15,000 in today’s terms when you retire.
Mercer’s research indicates that many employees could be forsaking as much as 10 per cent of their salary each year by not participating in their pension scheme.
Shauna Rowley a 23-year-old actuary who conducted the research says: “What surprised us most was that when we analysed schemes where employees had to opt out of contributing as opposed to opt in, the participation rates went through the roof with 90 per cent plus contributing”. So it’s not that we can’t afford it; more so that most of us can’t be bothered to start!
This inertia may mean you are not availing of what is, in effect, a bonus from your employer, with serious consequences for your future wealth. Shauna explains, “On average, 10 years of failing to partake in their pension scheme will reduce your defined contribution pension pot by nearly €150k at retirement.”
The above video by Mercer explains how important it is for Generation Y to plan now for their retirement in a future in which one in five of us will live to be 100. The good news is that saving now, no matter how small, will make a big difference later on. As Shauna says: “This does not require a fundamental change in lifestyle. Small changes can make a big difference, a coffee forgone now could equate to a nice meal and a coffee when you retire.”
Check out Mercer’s Website on www.Mercer.ie
