Boring boring pensions 😒

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Pensions aren’t exactly a hot topic, are they? “We want to get rich quick” I hear you shout. Don’t worry, next week's episode is on robbing banks.

Seriously though, let's settle down and pretend to be mature for just a moment.

Across Europe, state pensions are in serious trouble. Ireland is at the lower end of the risk spectrum as we only spend ~5% of GDP on state pensions, but in France and Greece, it's nearly 15% (Source). With ageing populations, longer life expectancy and lower birth rates, the state pension might not be sustainable in the not-so-distant future as governments (taxpayers) foot this ever-growing bill. 

Now, everyone should be investing for their future…everyone. And thankfully in Ireland, ~80% of us have some form of private pension! Well done you lot. But that leaves nearly a million people without. As a result, Ireland is now rolling out the Auto-Enrolment pension scheme this year to help support people when they retire. Why? Well, lots of companies don’t offer pensions to their employees and when those people retire, they’ll need to survive on the state pension alone. Which is barely enough to stay above the poverty line!

Now, the scheme isn’t perfect. SMEs will be hit hard due to the mandatory contributions employers are expected to pay, but that’s a conversation for another day. 

What I do think is worth discussing is how this highlights the need for people to lay the foundations for their future. Financial insecurity looms larger than ever for Ireland’s 20/30 year olds. Job insecurity, cost of living, interest rates and unaffordable housing is the rancid meal we’re all currently choking down. And when times are tough, investing in something that far out (retirement) can seem like an unaffordable luxury. But it's not as far away as you think, regardless of your age!

“At least we have our pensions”, you say. True enough. But the same problems that affect state pensions affect private pensions too. The average life expectancy is greater than ever but everyone still retires at roughly 66. Pension funds have to pay out to each customer for roughly 15 years longer than they did in the 1950’s. Meaning pension funds are at risk of becoming seriously underfunded. How it plays out, I do not know. But relying solely on your pension for your retirement might not be as safe as it once was!

Don’t get me wrong, it’s great that most of the Irish population have a private pension of some kind but ask yourself what you even know about it. Who is it with? And what is it invested in? I used to ignorantly assume it was this thing I couldn’t touch or have my say in. Turns out I had more control than I realised. And so do you. Ask the questions and make the calls.

Regardless, a good investment plan means diversification. Investing across a range of assets. So make sure to look at all your options:

• Public market assets — Stocks, bonds, cash. Think individual stocks, managed funds, ETFs.

• Private market assets — Venture capital/Private equity, private debt, real estate, art etc.

The latter has historically been reserved for the wealthy, but don’t worry, we’re working on that one for you 😉

Your pension is just one stream but it usually forms the foundation of your retirement plan. And at that, you probably know little about it. Assume nothing and ask the questions.

We all want the good life. Maybe you should take a more active role in planning for it!

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of PitchedIt. We were both sick of private markets being a playground exclusive to the ultra-wealthy. So… we started a company to challenge the status-quo. PitchedIt’s singular focus is to unlock private markets for Millennial and Gen Z retail investors and help them build wealth through the highest performing private market opportunities.

Scott & Rob
PitchedIt Co-Founders