Our behaviour when it comes to retirement planning is conditioned by behavioural heuristics. In simple terms this means that our decisions are based on rules of thumbs that simplify decisions under conditions of uncertainty.
In the pre-COVID world the key rule of thumbs that impacted our decision-making on retirement planning is that retirement is a long way away and that you donot have to plan for it now as you have ample time to do so. Invariably, the decision to save for retirement keeps being postponed.
The number of persons who subscribed to a private retirement plan since local pension products entered the market in late 2015 by the beginning of this year reached nearly 6,000. In a very short time we have started to see a culture of saving for retirement through private pensions instilled, and in doing so ensuring a pension income in retirement that complements the state pension.
There is another rule of thumb that effects planning for retirement: the here and now. In the here and now paying the mortgage, education, clothes, etc. is more important than planning for a retirement which is 30, 25 years away.
The COVID 19 complicates the here and now. In the here and now your priorities may be cutting down on expenditure as you are on reduced income, and that saving for a pension is a nice need but definitely not a want. If you have a pension plan you may be tempted to pause your contributions on your retirement plan; and if you were planning to invest in a pension plan you may be considering scrapping this altogether.
Within the constraints of the here and now the ĠEMMA team recommends that you do not completely pause your contributions. If possible lower the contribution paid but do put each month something in your pension plan so that you continue to strengthen your future financial security. Do not forget, you are entitled to a tax credit of 25% of a maximum annual contribution of €2,000.