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Irish Times
10 hours ago
- General
- Irish Times
Time off to care for children can leave women poorer in retirement. Here's how to close the gap
Ireland's gender pay gap may be improving but it's still a reality. And for young women, the implications extend far beyond what they can expect in their weekly or monthly pay packet. Finding out that you are paid less than your male colleagues for the same type of work is clearly demoralising: realising that today's insult could mean a permanent financial disadvantage in the far off days when you eventually retire should be deeply worrying. It means that at an age when most people are understandably focused on just establishing themselves in their careers – and when all the data tells us that pensions are seen as a low priority – women need to be pension aware. And thanks to the power of compound interest, the gap in retirement income will be even larger than any gap in pay. READ MORE Reporting and research on gender pay gaps is improving all the time and as it does, the impact on pension pots will diminish but, as of now, PwC pensions partner Munro O'Dwyer says, the gap is around 11 or 12 per cent, though, clearly, that can vary from sector to sector. What is the gender pension gap? Data published by Irish Life this time last year found that, in Ireland, there was a 36 per cent gender pension gap . For every €100,000 a man has in their pension pot, on average, a woman will have just €64,000. The practical impact is that women will either have substantially less money to live on each year in retirement or their pension pot will be exhausted before they are likely to die. When you consider that women in Ireland, in general, live for three and a half years longer than men, the reality is that they need a bigger pension pot than men, not a smaller one. The Irish Life report said women would need to work for eight years longer than men just to match the men's pension pots! O'Dwyer notes that the gender pay gap is just one area of disadvantage for women when it comes to pensions. How does staying at home with children impact pensions? Women are also more likely to take time out of the workforce for caring commitments – either to raise children or to care for older relatives – than men. And where they do stay in work, those commitments mean they are more likely to be in part-time employment. As a result, their pay will be lower as will contributions into an occupational pension – both their own and those coming from their employer. Even in couples not wedded to such traditional division of labour, simple domestic economics where the male partner is bringing in a higher wage can often mean they opt for the lower earner to step back from the workplace. That's not universal, of course, but it remains more likely as of now. How can you close the gender pensions gap? So, in a working world that is still skewed against them, what can women do too offset the disadvantages? First, get started early. It's good advice anyway as the longer funds are invested in a pension the better the eventual return. But if you are a young woman and you are likely to be taking a step back from work at some point to raise a family, it's even more important. 'The best advice is to make an early start to contributions at the highest level you can afford,' says Ray McKenna of employee benefits group Locktons. 'The best opportunity by far to build retirement funds tends to be when in employment. Not only does the employer also contribute, but the tax relief reduces the cost impact ,' says Shane O'Farrell, who is director of workplace market at Irish Life Employer Solutions. 'So people returning to the workforce after periods of absence (or those about to leave employment) should look carefully to address the missing years by additional top up contributions, ideally following a financial health check'. Given the generous tax relief available – up to 40 per cent for those paying tax at the upper rate – there are limits on how much you can invest in a pension. Having said that, the limits are generous enough that very few people hit the relevant caps. Under the age of 30, you can get tax relief on anything up to 15 per cent of your gross salary that you put into a pension. In your thirties, that share jumps to 20 per cent, rising to 25 per cent in your forties. Between 50 and 54, the figures is 30 per cent, rising to 35 per cent between 55 and 60. Over the age of 60, you can put up to 40 per cent of your gross salary into a pension while availing of relief. There are two other caps. First, when assessing those percentages, the upper salary limit is €115,000. If you earn less than that, no worries; if your gross salary is higher, you just get the percentage appropriate to your age of the first €115,000 of salary. So, if you're 42 and earning €130,000, the maximum pension contribution you can secure tax relief on is €28,750 (25 per cent of €115,000). [ Childcare in Ireland: 'Even as well-paid professionals, it was an exhausting struggle. The numbers never added up' ] In addition, there is a cap on the total size of your pension fund for tax relief purposes, called the Standard Fund Threshold, which is €2 million. Again, this will affect very few people when you consider that, according to 2023 PwC figures, the average private pension pot in Ireland is a very modest €75,000. For what it is worth, if you are relying on a €75,000 pension pot in retirement, you will feel the pinch financially, so I would suggest aiming higher than that. It would only deliver income of somewhere between €3,750 and €4,500 a year on top of any State pension you are entitled to. But let's get back to our young woman starting out in work. If you are in your 20s and earning, say €35,000, you can still put €5,250 a year into your pension. And because that is deducted from your gross salary before tax, it would cost you even less. Now at €35,000, you'd still be paying income tax at 20 per cent so your tax bill will be €1,050 lower for the year than it otherwise would be. That means, in take-home pay terms, the €5,250 pension contribution is costing you just €4,200, or €350 a month. Someone in their thirties on the average industrial wage – €53,352 as of the first quarter of this year – could put as much as €10,670 into a pension. Almost all of this would otherwise be taxed at 40 per cent so your €10,670 will actually cost you just €6,677.60 in take-home pay. And that's even before you consider that many employers will match your pension fund contributions within certain limits. Those limits – and indeed what you might be allowed to put into your company's occupational scheme – will likely be significantly lower than the amounts above but there is nothing stopping you taking out Additional Voluntary Contributions (AVCs) to accommodate the balance. Employers won't contribute to AVCs but it does allow you max out your tax relief. And remember it is not all or nothing. If you cannot put in the maximum permitted, it's not the end of the world. Should I increase my pension contributions? The key message for young working women is that it is more important for them than it is for men to invest as much as they can in their pensions early to allow for the fact that you might miss out contributions in some years when you are out of the workforce. If you are taking unpaid time out of work, you will not be permitted to contribute to the company pension scheme for that period. However, if you did not use up your full pension tax relief threshold the previous year – the 20 per cent of salary in your thirties for instance – and you have the financial resources available, you can make additional pension contributions via an AVC or a personal retirement savings account (PRSA) up to the end of October the following year. As an example, Patricia (35) earns €55,000 and last year contributed 6 per cent (€3,300) to a company pension, a figure that was matched by her employer. That 6 per cent is well below the 20 per cent limit on pension investment that she can get tax relief on. Patricia has taken unpaid time off work this year to spend more time with her children who are just making the transition to school. She won't be able to invest in the company pension scheme as she's not being paid. However, as long as she acts before the end of October – including filing a tax return – she can put up to €7,700 into an AVC or PRSA and get a tax refund for 2024 of €3,080, which means the €7,700 investment will only cost her €4,620. You can only go back one year like that but at least it will help. What are the benefits of flexible hours? Another approach, says Locktons' McKenna is to see if your employer is prepared to be more flexible around work patterns. With hybrid and remote work more common, and more practicable than it used to be, many people can continue to work as long as employers allow wriggle room. That would, for instance, allow the carer (woman or man) to put in their work hours when their partner has finished their more regular working hours. The main advantage, in pension gender gap terms, is that as you are still being paid, you can continue to make contributions to the company pension scheme. Also, as you are earning income, there is income tax against which you can offset the tax relief on those contributions. Otherwise, apart from the one year lookback arrangement we spoke about above, any contributions you make to an AVC while out of paid employment – even if you had the financial wherewithal to do so – would have no tax to claim relief from, reducing the attraction. There are other factors that also disproportionately play against women where improvements are more at the gift of government and industry rather than something over which individuals have control. [ Health takes a back seat when working and raising young children. We just get on with it Opens in new window ] PwC's O'Dwyer points to waiting and vesting periods for occupational pensions. Many company schemes do not allow staff to join their scheme for six months after they start work. And, if you leave the company within two years of joining an occupational scheme, companies can, and do, simply give you back any contributions you made to the scheme in that time. That means you lose out on the benefit of any employer contributions and the investment performance on those and your own refunded contributions not just to the point where you leave the business but also over the following years right up to when you retire. Because of women's employment patterns, O'Dwyer says this works more against women than men. He also notes that in an era when technology allows for immediate action on signing people up to schemes, there is no justification for waiting periods. While there are ongoing criticisms of the incoming mandatory workplace pension scheme – auto-enrolment or My Future Fund – planned for next year, O'Dwyer notes that it will at least ensure that people are signed up from the date of employment without waiting periods and that their pension fund will remain invested even if they do move jobs or otherwise leave the employer within two years. He notes that there is more Government could do; for instance, the State could continue to make its contributions to a person's auto-enrolment account during periods of unpaid leave in line with the level of State contributions before the leave. Other countries, O'Dwyer says, have looked at one-off contributions to women's pensions at events such as childbirth for social policy purposes in a world where more and more western economies are concerned at low rates of childbirth. 'Having children is very important (for an economy) and financial support is very important,' he says. 'There are ways it can be done. There is a cost but it is arguably an investment in the future.' You can contact us at OnTheMoney@ with personal finance questions you would like to see us address. If you missed the last newsletter by Dominic Coyle on setting up a bank account before coming to Ireland , you can read it here .
Irish Independent
30-05-2025
- Health
- Irish Independent
Smokers and vapers paying almost double the price non-smokers pay for life insurance and mortgage cover
Quitting smoking and vaping could save individuals and couples tens of thousands of euro over the lifetime of a mortgage protection, life insurance, and specified illness policy. Vapers are also being warned about the financial consequences of their habit, according to new research from price-comparison site and brokerage firm The research also shows the importance of shopping around, even for non-smokers. Ahead of World No Tobacco Day tomorrow, smokers are being encouraged to quit: not just for their health, but for their wallets too. The research showing that the cost of life insurance is almost double for smokers was carried out this month by comparing prices for smokers and non-smokers from the country's five leading life insurers: Aviva, Irish Life, New Ireland, Royal London Ireland, and Zurich Life. As well as being a price-comparison and switching website, is a broker for both life insurance and mortgages. Smokers would pay at least €192, a difference of almost €33,000 over the term When it comes to mortgage protection insurance, a 38-year-old couple could pay as little as €35.60 a month for €300,000 in cover over 30 years if they are both non-smokers. But if both are smokers, the cost jumps to €70. Bonkers said this is an increase of almost 97pc, or nearly €12,500, over the life of the policy. Mortgage protection cover is a legal requirement for anyone taking out a mortgage in Ireland. Adding €100,000 in specified illness cover to the same policy would cost €101 a month for non-smokers. But smokers would pay at least €192, a difference of almost €33,000 over the term. ADVERTISEMENT The gap is even wider for life cover. Life cover pays out a tax-free lump sum if one of the insured dies during the term of the policy and is considered an essential part of financial planning for families. A non-smoking couple could secure €300,000 in cover over 30 years for around €51 a month, while smokers would pay at least €104. This is a difference of almost 103pc, or almost €19,000 over the lifetime of the policy. And for a standalone specified illness policy, worth €150,000 over 30 years, non-smokers would pay €195.87 a month. Smokers would be charged €333.44 – almost €50,000 extra over the full term. While smoking has declined in recent decades, about 16pc of people aged 15 and over in Ireland still smoke either daily or occasionally, according to Census 2022. However, many more vape. Daragh Cassidy of said vapers, even if they have never smoked in their life, will still be treated as smokers by life insurers. World No Tobacco Day is on May 31 every year. It is an awareness day created by the World Health Organisation (WHO) to highlight the health risks associated with tobacco use. Mr Cassidy said: 'Quitting smoking really is good for your pocket as well as your health. It's not just the cost of cigarettes that you'll save on. As our research shows, the price you pay as a smoker for important life insurance products such as mortgage protection, term insurance, specified illness cover and income protection is often close to double what a non-smoker would pay. 'This means kicking the habit can save you tens of thousands of euro over the lifetime of these products.'
Irish Times
27-05-2025
- Business
- Irish Times
Is investing (finally) getting cheaper in Ireland?
There was a bit of a stir in the financial advice community when Royal London arrived in the Irish pensions market. The UK mutual insurance society had been active in the Irish protection market for many years, when it decided to broaden its reach last November, launching a PRSA as part of its burgeoning Irish pensions business. So why the stir? The new entrant opted to publish its pricing structure on its website, with access for all – and some competitive charges. It has brought a welcome dose of transparency to a market that savers have often found tricky to navigate, given the myriad charges that can apply. It's not a perfect outcome; the taxation system around investing in Ireland still needs to be updated, while costs are still less competitive than elsewhere. But, thanks also to the arrival of new online players, which often offer a more cost-effective product, competition is finally beginning to crunch. READ MORE 'It's only the start,' says David Quinn, managing director of Investwise. This is good news for investors. Status quo Many Irish investors make their first move into the markets via a life-wrapped product sold through a bank, a life company or a financial adviser. The advantage of such products is that tax, via the gross roll-up system, is taken care of for you. So, no filing reports with Revenue. The downside, however, is that investing this way can be expensive. Contrast Irish Life's Indexed Ethical Global Equity fund with Blackrock's iShares MSCI World Screened. Both track the MSCI World ESG Screened Index – but have different charges. The iShares fund has a total expense ratio of just 0.2 per cent: Irish Life's fund has a fee of 0.75 per cent. And it's not always clear what the full extent of charges on Irish funds are, as we don't have a total expense ratio (TER) or total cost of ownership approach. 'Costs were opaque, with the cost of advice, administration and investment management all built into one single annual fee,' says Quinn. And, given how financial advice works in Ireland, where advisers can still be paid under the commission model (the UK banned this in 2012), the total costs of these products are not always clear. 'This annual fee often includes an upfront commission payment to the sales adviser,' says Quinn, adding that the annual cost of such a fund is about 1.5 per cent. As he notes, there can be further 'hidden' costs in a fund, which are not always required to be disclosed under regulatory rules. These can be as high as 0.5 per cent, bringing the total cost closer to 2 per cent per annum. That's a hefty deduction from any possible gains your fund might make. New options But, the tide might be turning. In 2022 Royal London, which already has a protection business in Ireland, became the first new pension provider to enter the market in more than a decade – and the first life assurance company in more than 30 years. It first brought approved retirement funds (ARFs) and a personal retirement bond to the market and then, last year, launched a PRSA . And it's just the first step. 'There are lots of exciting plans for the future as we plan to grow this side of the business,' says Noel Freeley, chief executive of Royal London Ireland. Quinn says Royal London's 'aggressive pricing' has put some of the other providers under pressure. Royal London now offers ARFs and PRSAs in the Irish market, with annual fees as low as 0.35 per cent (remember financial advice fees will also apply, as this is the wholesale price, and it applies on savings above a certain level). Royal London also offers its customers a value share. 'It's an additional boost that may be added to customers' fund returns in years that the company does well,' says Freeley. 'Though not guaranteed to be awarded every year, once awarded, it belongs to the customer and can never be taken away. 'In April 2025, value share was awarded for a third year in a row.' This year, it was paid out at a level of 0.13 per cent, thus driving down annual costs to just 0.22 per cent. 'It's unbelievably competitive,' says Quinn. While 'you can't bank on the value share', as it is a discretionary payment, it has been 'fairly consistent' in recent years, he says. Not only that, but Royal London also put its charging structures on its website; typically such payments are hidden behind broker-only access areas. They show ARF charges of 0.4-0.9 per cent, depending on the assets in the fund. According to Freeley, transparency is important to the company. 'Our research identified key areas that were important to customers, such as perceived affordability, which was the main reason for people not having a pension at the time. Therefore, pricing and transparency on fees and charges was important,' he says. More competition It's putting pressure on other providers to be more competitive. Irish Life, for example, is understood to have recently cut charges for underlying contracts taken out on its Portus platform by 10 basis points – that is, from 0.5 per cent to 0.4 per cent. And, as Quinn notes, the move towards cheaper index funds has made it clearer for investors that they may, in certain circumstances, be overpaying. This has also put product providers under pressure to keep costs down. 'People are more cost conscious,' he says. Indeed, a spokeswoman for Aviva says that while it has not cut retail charges of late, it has launched a 'number of lower-cost passive investment options for consumers' to complement its existing range of active funds. Revolut says you can invest €1,000 in the iShares S&P 500 UCITS for a total cost of just €0.73 after a year. Photograph: Justin Tallis/AFP via Getty New players The incumbent players are also facing a wave of new competition from the likes of Revolut, Interactive Brokers and deGiro. These offer low-cost access to a range of investments, such as exchange-traded funds and shares. For example, Revolut says you can invest €1,000 in the iShares S&P 500 UCITS for a total cost of just €0.73 after a year (based on growth of 7 per cent, and a TER of 0.07 per cent). Such investments are typically bought on an execution-only basis, which means investors won't benefit from financial advice – but nor will such fees apply. And, while tax can be an issue, particularly when it comes to ETFs and deemed disposal, change might be coming on this front. Last October, then minister for finance Jack Chambers published the latest communication in a possible reframing of taxes in the investment fund sector. As pointed out numerous times in the consultation process, the Irish system for taxing investments is inconsistent and off-putting for investors. [ Investors still face wait for overdue Irish ETF tax reforms Opens in new window ] There is a growing expectation that changes will be announced in this year's budget, after they were included in the 2025 programme for government. According to a spokesman in the Department of Finance , officials are 'reviewing options for measures that could be taken to assist with retail participation in capital markets', taking into account developments at an EU level in respect of the Savings and Investments Union. Making the investment landscape more tax-efficient should mean ETFs that are easier to account for and cheaper – and bring about another wave of much needed competition for beleaguered investors.
Irish Times
19-05-2025
- Business
- Irish Times
Auto enrolment: employers can't afford to wait any longer for start of pension scheme
After years of promises and planning, Ireland's long-awaited auto-enrolment pension scheme , has hit another bump in the road. Much delayed, but planned for a September 2025 launch, the Government has now confirmed it will be delayed by 'a small number of months'. The scheme is now set to begin on January 1st, 2026. When it arrives, auto enrolment will mark one of the most significant Irish pension reforms in decades. But shifting timelines and a lack of clear communication have significant implications for employers and employees alike. Minister for Public Expenditure Jack Chambers cited the 'enormous scale' of the initiative and the need for extensive cross-departmental coordination. With global economic conditions unsettled, there's also a clear sense that the Government is being extra cautious about adding pressure to businesses already navigating significant volatility. READ MORE The official line is a delay of just a few months, but co-ordinating across departments, building a new national platform and enrolling more than 800,000 people is a significant undertaking. [ Half of small firms not prepared for auto pension enrolment, says Irish Life Opens in new window ] Employers were told to prepare for 2025, and many already have. A further delay creates confusion and risks undermining confidence in a system that needs buy-in from day one. For business owners, particularly small and medium-sized businesses, this delay is a mixed bag. Neil McDonnell, chief executive of Isme, described the delay as a " welcome development' adding: 'This is a recognition that businesses need help and that we need to slow down the velocity of cost increases for businesses. We are in favour of auto enrolment, but we have just seen business costs increase at too fast a rate in the last two years.' In terms of the delayed implementation, there are a number of things employers should review: Administrative adjustments: revisit implementation timelines to ensure payroll systems and HR policies are adaptable to the updated schedule; Employee communication: clear and timely updates help maintain transparency and trust; Strategic planning: use the extra time to refine pension strategies so they align with business goals and employee needs. On one hand, the delay eases immediate pressure on businesses. It gives companies more time to prepare, particularly useful for those still getting their systems and payroll aligned. On the other hand, for the many businesses that have already invested time, money and resources into being ready, it's frustrating. And this isn't just about compliance. Pensions are now a key part of an employer's value proposition. In a competitive hiring market, a solid pension plan can make all the difference. For every €3 a worker saves, the employer matches it with €3, and the State tops it up with €1. It's a strong model. But every delay means lost time, lost savings and lost momentum Government delays shouldn't stop businesses from strengthening what they already provide. For the near 800,000 workers who would benefit from auto-enrolment, primarily those aged 23 to 60, earning over €20,000 without an occupational pension, this delay means more time relying on a State pension that was never designed to cover today's cost-of-living crisis . The scheme's design is simple and compelling, for every €3 a worker saves, the employer matches it with €3, and the State tops it up with €1. It's a strong model. But every delay means lost time, lost savings and lost momentum. Businesses need a clear timeline and employees deserve transparency. If the roll-out is being reconsidered, that's understandable, but there is a need to communicate what's next. Uncertainty makes planning harder, especially for SMEs already stretched by inflation, wage growth and ongoing compliance changes. While the delay is frustrating, it's also an opportunity. Business leaders shouldn't pause their preparations, they should use this time to get ahead. If you run a business, this is the moment to make sure your pension offering isn't just compliant, but competitive. Take a good look at what you already offer. Is it meeting your employees' expectations? Is it simple to manage? Is it something you're proud to talk about in a job interview? Employees are paying attention. They're more aware than ever that relying on the State pension alone won't be enough. A strong, clearly communicated pension scheme is a powerful part of your employer brand, and one that can help you retain talent and stay ahead of the curve. This isn't about waiting for Government timelines. It's about being proactive, building confidence with your team and proving that you're in it for the long haul. Robert Whelan is managing director of Rockwell Financial Management
Irish Times
14-05-2025
- Business
- Irish Times
Half of small firms not prepared for auto pension enrolment, says Irish Life
Half of Irish companies with fewer than 50 employees are not prepared at all for the introduction of automatic pension enrolment, even though they are more concerned than larger firms about the impact of the regime, according to a survey by research firm Red C for Irish Life. The finding comes as the Government decided last month to postpone the launch of the auto-enrolment (AE) regime again, this time by three months to the start of January 2026. The recent survey of 150 companies found, however, that three-quarters of larger companies have put work into considering the regime and the approach they plan to take, Irish Life said. Many intend to nudge AE-eligible employees towards their own defined-contribution (DC) pension plans or include clauses in contracts for new employees that would compel them to join company schemes, according to Shane O'Farrell, Irish Life's director of workplace markets and employer solutions. READ MORE 'It's clear that a lot of smaller organisations have not yet thought about AE. It's going to end up being a budgeting shock for them if they don't engage with this,' said Mr O'Farrell, noting the survey has shown that small firms remain more concerned about the effects of AE on their business than larger ones. Will DoorDash takeover of Deliveroo mean better pay and conditions for gig economy workers? Listen | 28:33 The Department of Social Protection has in recent weeks launched a search for a chief executive of the National Automatic Enrolment Retirement Savings Authority (Nearsa), which will oversee the administration of the AE scheme. The appointee to the €215,000-a-year role will be expected to 'bring vision, strategic leadership and effective management across all the functions of the Nearsa in order to ensure that it discharges its functions efficiently and effectively to the benefit of its estimated 800,000 participants and Irish society more generally,' according to an information booklet for candidates. May 29th has been set as the closing date for applications. The AE scheme will be known as My Future Fund. It is expected it will hold more than €20 billion of assets on behalf of beneficiaries within 10 years, rising potentially to more than €300 billion over 30-40 years, according to the booklet. First proposed by then government Fianna Fáil minister Séamus Brennan in 2006, AE has been through years of delays and false dawns. However, enabling legislation was finally enacted last July and Indian group Tata Consultancy Services was signed up in October to build and run the AE system. The department is in the middle of procuring three investment managers to handle the assets in the fund. Under the terms of the Irish scheme, which applies to workers aged between 23 and 60 who earn at least €20,000 per annum across one or more jobs, employers and employees will each initially contribute 1.5 per cent of gross earnings to their pension pot, with the government adding a further 0.5 per cent. The contributions are due to increase in stages over 10 years, reaching 6 per cent, 6 per cent and 2 per cent, respectively.
