Originally appeared in
Give a little extra today and your future self will thank you later
Published in The Sunday Times on May 10, 2026.
Minimal compliance describes the tendency to do what is required but only the bare minimum, meeting the letter of a requirement but not the spirit. Not for the first time I’m thinking about this in the context of retirement planning.
If not during the recruitment phase then at some point after commencing a new employment, you will be informed what pension provision goes with the role. It wasn’t always the case but, since the recent introduction of auto-enrolment, all employers must now contribute to a pension scheme for employees.
Research recently released by PTSB found that 48 per cent of respondents stated they were not confident they will be able to afford the lifestyle they want in retirement. Where has it all gone wrong?
Joining a pension scheme which has an employer contribution only is not something that requires much consideration – it is, as we would say, a no-brainer. The more common scenario would be for an employee to be required to make some level of contribution which the employer matches. The most common employer contribution is 5 per cent.
You may think that even this type of matching arrangement is a good way along the road to being a no-brainer. Yet, remarkably, many employers who offered matching schemes before auto-enrolment reported only modest take up by employees.
The issue, I am sure, can be explained by the concept of hyperbolic discounting. This refers to the human tendency to discount future benefits, especially those very far away, because the pain of providing them is immediate and tangible in terms of income (and, therefore, lifestyle) forgone now. The pensioner who is going to reap the future benefit seems like an entirely different person.
The introduction of AE is positive, but it won’t solve the bigger problem of inadequacy. Many people believe that if they and their employer have always contributed to an occupational pension scheme, they will have enough income to retire on. This isn’t necessarily the case at all.
The member contribution and matching employer contribution that apply to your pension scheme are not set at a level which it is calculated will provide a sufficient income in retirement; they are set according to the cost the employer is prepared to bear, and only recently with reference to minimums set by the Minister for Social Protection. Although these are a substantial additional cost for employers, on an individual basis they are quite low. If staff retention is an issue for the employer, they may also factor in what is necessary to be competitive in their sector. None of these factors are, however, in any way related to the pension fund you will need in order to have a comfortable retirement.
If on the day the bank advanced your mortgage they told you that they had set up the repayment for a nominal amount which ultimately wouldn’t repay the mortgage in full, you’d object and demand that the correct figure be used. When setting up a pension however, most people, certainly in the early stages of their career, default to the matching contribution that their employer decides.
It follows then, that most people will need to make additional provision if they are to maintain their standard of living in retirement. This is even more likely to be the case if you started late, have a modest employer match, have taken a career break, or if you want to retire before the most common retirement age of 65.
When you contribute to a pension you benefit from tax relief, investment returns, and accelerated compounding of returns due to gross roll-up. One of the most underused benefits available to Irish taxpayers is the tax relief which is available on pension contributions. Each year you under-contribute is a year you can never recover. While the amount you can contribute and claim tax relief on increases as you get older, the problem with procrastinating is that eventually you will reach a point of no return where you cannot correct the problem as neither tax relief nor time will be on your side.
Pension penetration in Ireland was remarkably low until the introduction of AE so if you weren’t making provision for your retirement there was probably some comfort in knowing that you were in good company. You are not in good company anymore.
Eoghan Gavigan is a certified financial planner and the owner of Highfield Financial Planning hfp.ie
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