Shortfalls in pension provisions are forcing Irish farmers to work longer, a situation that is hampering generational renewal of rural businesses, according to a new report.
Joint research carried out by Teagasc, the agriculture and food development authority, and Maynooth University looked into pension systems across the EU with a view to addressing the historically low take-up of private pensions among Irish farmers.
The study confirmed that private pension coverage among agricultural communities in Ireland averages out at around 50%, although there are considerable differences between farming sectors. Among dairy and tillage farmers, take-up is around 70%, while for sheep and cattle farmers it falls to 40%. Reasons given for this low coverage include a lack of affordability and lack of trust in private pension schemes.
Farmers missing out on state pension
What the study also found was that state pension provisions in Ireland fall behind other EU countries in plugging this gap in private pension take-up. In many cases, low and variable PRSI contributions lead to farmers not qualifying for the state pension at all. The study highlighted the high qualifying conditions compared to other EU countries, particularly the amount of time PRSI contributions have to be made. This works against farmers who inherit their family business relatively late in life.
Another issue identified is the way that means testing for state pension eligibility in Ireland counts the value of non-cash generating assets. This unfairly inflates the perceived wealth of many farmers.
The sum impact of all these factors is that farmers are working later in life, and in some cases not planning to retire at all. But this serves only to exacerbate the issues. With no mandatory registration of family members who work on farms into the state pension system, it means more people taking control of farms too late in life to meet the contribution requirements.
The authors of the study also wrote about how this pattern blocks effective and sustainable ‘generational renew’ across the agricultural sector, locking communities into cycles of financial insecurity.
Farmers need dedicated pension support
The recommendations of the study include a call for Ireland to follow the example of countries like Austria, Finland, France, Germany, and Poland, which have tailored social welfare schemes that recognise farming’s status as a high-risk, low-profit industry. In short, the report calls for more generous pension support for farmers to help ensure they can retire securely. These countries are all also members of the European Network of Agricultural Social Protection Systems (ENASP), and their farmers benefit from cross-border collaboration on pensions and more.
Because of the challenges of increasing private pension coverage among farmers and self-employed people in general, the report also recommends extending auto-enrolment (AE) to these groups. AE was introduced last year to make enrolment in a workplace pension the default for employees. Such a move would require a significant realignment of workplace and private pensions, which are currently not included in AE, and possibly the introduction of a government-administered private scheme. In the meantime, if you do work in the farming and agricultural sector and would like more information about pensions and retirement planning, our dedicated team of agriculture finance specialists are available to talk you through your options and offer impartial advice drawn from years of working in the rural economy. Get in touch to speak to an advisor in your area today.
