Occupational pension coverage and timing of retirement in Ireland

Ireland has historically relied heavily on the State pension as the primary source of income in retirement. While occupational pension coverage has risen steadily in recent years, a substantial share of older employees still approach retirement without supplementary pension provision. Understanding how occupational pension coverage relates to both the timing of retirement and income adequacy in retirement is critical in the context of population ageing, pressures on the public finances, and the introduction of auto-enrolment in 2026.
 
This paper examines planned and actual retirement ages for those with and without an occupational pension, using data from The Irish Longitudinal Study on Ageing (TILDA) covering the period 2010–2018. We focus on a homogeneous sample of employees and former employees with sufficient PRSI contributions to qualify for the State Pension (Contributory), and explore heterogeneity of outcomes by sociodemographic groups, including sex, education, employment sector and region. 

We find clear differences in planned retirement ages between sociodemographic groups. Individuals with occupational pension coverage plan to retire earlier, at around 63.5 years of age, while those without coverage typically plan to retire close to the State pension age of 66. In practice, however, both groups retire at broadly similar ages, at around 61 on average. As a result, employees without occupational pension coverage experience a substantially larger gap between planned and actual retirement ages – almost 5 years on average – compared with a gap of under 3 years for those with occupational pension coverage. These differences are statistically significant and are driven primarily by differences in planned, rather than actual, retirement ages. 

The retirement age gap is especially pronounced among women without occupational pension coverage. This group retire at a much younger age, on average around 58.5, despite planning to retire close to 66, resulting in a gap of almost seven years. By contrast, women with occupational pension coverage both plan and retire earlier, and have retirement age gaps similar to men. Regression analysis shows that occupational pension coverage reduces both planned and actual retirement ages. 

While retirement timing is similar across groups, retirement incomes differ sharply. Individuals with occupational pension coverage retire to substantially higher incomes than those without coverage. Median total weekly retirement income is approximately €460 for those with occupational pension coverage, compared with €230 for those without. State pension and benefit incomes are similar across groups; the large gap in total income is driven almost entirely by occupational pension coverage. Consistent with previous ESRI research, we find that the gender pension gap is due to the lower rate of occupational pension coverage for women as well as lower occupational pension amounts when covered: men with coverage receive much higher retirement incomes than women with coverage, while men and women without coverage have similarly low retirement incomes. Previous ESRI research found that the biggest contribution to the gender pension gap is years spent working. 

Although occupational pension coverage does not appear to substantially delay retirement from the labour market, it plays a crucial role in determining living standards in retirement. Those without occupational pension coverage not only retire earlier than planned but do so with significantly lower incomes, raising concerns about poverty and financial insecurity in older age, particularly for women. Moreover, widespread early retirement relative to the State pension age implies foregone tax and PRSI revenue and increased pressure on public spending. 

Overall, the results suggest that occupational pension coverage matters far more for retirement income adequacy than for retirement timing. As Ireland rolls out auto-enrolment in MyFutureFund, future research will be needed to assess whether expanded coverage improves resilience to involuntary retirement and reduces inequalities in retirement outcomes, especially for women.