The lack of a sufficient pension pot for farmers outside of the farm is putting pressure on the succession process, according to Donal Riordan, head of FBD life and pensions.

New data from FBD life and pensions shows pension savings among farmers typically peak at around €130,000 for those aged 60 to 69, just as retirement approaches.

The data also shows that the average Irish farmer pension pot stands at just over €110,000 between the age of 50 to 69.

ADVERTISEMENT

While many farmers may have additional assets outside of pensions, including land, livestock or savings, the figures suggest retirement provision remains relatively modest for many when viewed against the prospect of funding a retirement that could last 20 to 30 years, Riordan said.

The challenge becomes even clearer when pension drawdown is considered. Using a commonly cited drawdown rate of around 4% per annum, FBD outlined that a pension pot of €110,000 would generate an income of approximately €4,400 per year before tax, while a €130,000 pension fund would provide around €5,200 annually.

There are several reasons why pension savings can fall behind

“For many retired farmers, this level of income would be insufficient on its own and highlights the importance of having retirement plan,” Riordan said.

“There are several reasons why pension savings can fall behind. Farm incomes can be unpredictable, making regular contributions difficult. Many farmers prioritise reinvesting profits back into the business through land, machinery or livestock purchases.

“As a result, some may be asset rich but cash poor, with retirement planning taking a back seat to day-to-day farm investment,” he said.

The head of FBD life and pensions said that too many farmers reach their late 50s and 60s without having built sufficient retirement provision outside of the farm.

“That creates pressure on the succession process because the farm effectively becomes the pension plan, whether it is suitable or not,” he said.

The consequences extend beyond succession delays, he added, noting that farmers may feel compelled to continue working longer than planned, face greater financial uncertainty in retirement.

“Successful succession planning cannot begin with the question of who gets the farm,” he said. “It must begin with a different question: how will the retiring farmer fund the rest of their life?

“Early planning, open discussion and proper financial advice are essential.”