Low interest in deferred state pension expected due to ‘poor value for money,’ experts say

A survey of financial advisers has found that most of them consider the terms of the deferred state pension offering to represent poor value for money.

Since January, workers have had the option of deferring claiming the state pension and working longer in return for a higher pension when they choose to retire.

People are now able to work up to the age of 70.

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But this deferred state pension does not represent value for money, most financial advisers surveyed said.

And they said state pension ­changes will have “little to no impact” on encouraging people to work longer, according to the findings of a survey of 160 financial advisers undertaken by leading pension trustees, Independent Trustee Company (ITC).

On the other hand, most financial advisers believe there would be strong uptake if workers could choose to retire at 60 on a smaller state pension.

Eight out of 10 advisers surveyed said the deferred pension does not represent value for money, and that it will not encourage people to postpone their retirement.

The survey examined whether these advisers nationwide – who work with people planning for retirement – believe the revamp of the state pension system will have its desired impact of encouraging people to remain in work for longer.

They said the new option will have little or no impact on the age that people ultimately decide to work until.

People currently qualify for a maximum weekly state pension of €277 if they retire at the age of 66.

But this rises to €337 a week if they work until the age of 70, under the deferred retirement option.

Someone who defers taking the state pension until they reach the age of 68 would end up with €305 a week.

However, only one in five financial advisers believe that deferring the state pension until the age of 70 to get €337 a week is attractive enough to encourage people to defer drawing down their pension at the current age of 66.

Just 3pc of financial advisers believe that the Government’s decision to give people the option to work for longer in return for a higher state pension will have a “significant impact” in encouraging people to work for longer.

Around one in five advisers believe the overhaul will have “no impact at all” on the age at which people decide it is time to retire.

But three in four advisers believe there would be strong uptake of an option to retire on a smaller state pension from the age of 60, if such an option were to be made available.

Head of business development at ITC Glenn Gaughran said: “The overhaul of the state pension system earlier this year was one of the biggest changes ever to state pensions in Ireland.

“While the main aim of this reform is to make the state pension system more sustainable, it appears that the Government has missed the mark and that there is little appetite for the changes introduced.”

Mr Gaughran said there was a need for an urgent re-assessment of the recent changes and how they might be improved in order to have the desired effect.

“It appears from our survey that the incentive to wait for the state pension should be significantly greater if it’s to have any meaningful impact on people’s retirement plans,” he said.