CPAS Pension Consultant STEPHEN LAWLESS examines why high participation rates aren’t translating into retirement security in Ireland, arguing that closing the pension gap requires tackling everyday affordability rather than relying on policy fixes alone.

Recently, when scrolling on my phone, an ‘Irish Times’ article popped up on my news feed, highlighting a recent report by Royal London. The report shows that Irish workers, on average, believe they will need €40,860 pa to enjoy a comfortable retirement.

It reminded me of another piece of research from 2024, the ‘Irish Retirement Living Standards’ (IRLS) report produced by KPMG. This report established that a comfortable retirement, for a couple, was an annual expenditure of approximately €43,200.

I was struck by the remarkably similar conclusions of the workers surveyed by Royal London and the analysis completed by KPMG in 2024. It made me wonder if workers are aware of what they need to live comfortably in retirement, then why are pension rates in Ireland so poor?

WHAT DOES A COMFORTABLE RETIREMENT ACTUALLY LOOK LIKE?

Set out in the 2024 IRLS report, a comfortable retirement is the ability to take holidays, enjoy hobbies, maintain health insurance and deal with unexpected costs that arise.

A 30-year-old earning €61,908 a year (the minimum salary needed to produce the target retirement income of €40,859) would need to save €1,135 per month to secure that level of retirement income. This is assuming they will also receive their full state pension. Wait until age 40, and it jumps to €1,754 per month.

And these figures assume a retirement at 66 years of age. Yet, according to a survey completed by Royal London in March 2025, almost 72% of respondents hoped to retire between the ages of 50 (38%) and 60 (34%).

The earlier retirement people aspire to, the wider the gap becomes between what they need in retirement and what they are currently saving to fund it.

IRELAND’S PENSION PROBLEM ISN’T PARTICIPATION

KPMG highlighted that Ireland’s net voluntary pension replacement rate is just 36%, compared with an EU average of 68%. In other words, for every €100 earned during working life, Irish private pensions replace just €36 in retirement income and see heavy reliance on the state pension.

One of the more surprising findings from the KPMG report is that Ireland’s participation rate in voluntary pension plans is comparatively high, at 66%. Participation exceeds levels seen in several European countries. And this was before Auto-Enrolment was introduced.

The issue increasingly appears to be not whether people save, but whether they save enough. The low replacement rate data suggests many Irish pension savers are contributing at levels that will not generate the retirement incomes they aspire to achieve.

WHY AREN’T PEOPLE SAVING MORE?

The answer is no surprise: the cost of living.

When non-pension holders were asked why they had not established a pension, affordability was the most spoken-about issue. Among those aged 45 to 54, 55% said they could not afford a pension. Similar concerns were evident across all surveyed.

Cost-of-living pressures for older participants in KPMG’s research were a prominent discussion. Rising energy bills, healthcare costs and insurance premiums all contribute to the diminishing ability to save.

Just as significant was the role of inertia.

A large proportion of respondents without pensions simply reported that they had “never got around to it”. As a nation that will always opt to “do it later”, we understand what is needed and how to get there but find it difficult to do it.

A NEED FOR HONEST CONVERSATIONS

The reality is that none of this information is new. Policymakers know Ireland’s pension replacement rates lag European norms, that workers struggle to contribute enough to private pensions, and that affordability remains one of the greatest barriers to long-term saving.

Auto-Enrolment is a welcome step and should help with the inertia experienced by some. However, there is a danger in assuming that increasing participation alone will solve Ireland’s retirement savings challenge.

Faced with rising housing costs, childcare expenses, energy bills and everyday living costs, retirement saving is now a luxury.

If the government is serious about improving retirement outcomes, the conversation cannot stop at pension policy. They must also address the broader cost-of-living pressures that prevent households from building adequate retirement savings in the first place.

Until more workers have the capacity, Ireland’s retirement income challenge will remain as much a cost-of-living issue as it is a pensions issue.

CPAS: HERE TO HELP YOU NAVIGATE YOUR WAY

The CIF Pension Administration Services (CPAS) team are qualified Pension Consultants. We specialise in helping professionals in the construction sector and related industries. Our team can work with you to review your pension plans.

For more information, please contact Stephen Lawless at s.lawless@cpas.ie