Every retirement plan carries one quiet assumption: that you keep earning right up to the day you choose to stop. Your pension contributions, your Additional Voluntary Contributions, your savings targets, all of them rely on an income arriving each month between now and retirement.
Which raises a question few people stop to ask. What happens to that plan if illness or injury takes you out of work for a year, or three, or five?
The retirement the research is worried about
The New Retirement Reality, a 2026 study by Amárach Research for FPSB Ireland, IOB, LIA and the Retirement Planning Council of Ireland, surveyed 1,200 working adults. One of its most revealing findings is that half of people expect to work beyond their intended retirement age for income reasons, and 51% wish they had planned earlier. The report is direct about the distinction that counts here: working longer out of necessity, rather than by choice, is a poor result for the individual and the employer alike.
There is a workplace angle as well. 77% of employers say financial worries drag down productivity, and 52% of employees fear their funds will not last through retirement. Financial uncertainty, the report concludes, has stopped being purely a personal matter and become a workplace one too.
Most of the discussion about closing that gap centres on saving more. Yet there is a risk sitting beneath the whole plan that rarely gets aired: what protects the income that does the saving in the first place?
Your income is the asset that funds everything else
Most people insure their car, their home and their life. Far fewer insure the thing that pays for all three, namely their ability to earn.
If you were unable to work for a long spell, the harm goes well beyond the missing salary. Your pension and AVC contributions stop, so the fund you are relying on stalls at precisely the point it should be building. You may have to draw down savings you had set aside for retirement. And the years you lose can be the very ones that later force you into working longer, not because you want to but because the plan has fallen behind. It is the exact outcome the report cautions against, arriving through the back door.
The State safety net is thinner than most people assume
A common assumption is that the State or an employer would simply step in. The reality in 2026 is more modest than most expect.
Statutory Sick Pay covers just 5 days a year, paid at 70% of your normal wage and capped at €110 a day, and only once you have 13 weeks’ service. The planned rise beyond 5 days has been paused, so 5 days is the floor for 2026.
After that, if your PRSI record qualifies you, State Illness Benefit takes over. It pays a maximum of around €254 a week in 2026, roughly €13,200 a year, for up to two years. For anyone on a professional salary that is a steep fall, and the self-employed do not qualify for it at all. Two years on, if you still cannot work, the short-term State supports have run out completely.
For most working people, that is a long way short of keeping a household and a retirement plan on track.
How income protection keeps the plan alive
Income protection insurance is built to fill exactly this gap. It pays you a regular monthly income if illness or injury stops you working, and it keeps paying until you recover or reach your chosen retirement age. Unlike a lump-sum policy, it is a steady replacement income that keeps everything moving, including the contributions feeding your pension.
A few features worth understanding:
- How much you can cover. In Ireland you can insure up to 75% of your gross earnings, less any State Illness Benefit. The cap is set so you are never better off not working.
- The deferred period. You choose a waiting period before the benefit begins, usually between 4 and 52 weeks. The sensible approach is to align it with whatever sick pay you already have, so there is no gap and no cover you are paying for needlessly.
- The benefit period. The strongest policies pay right up to your retirement age rather than stopping after a few years. If a serious illness keeps you out for the long term, a short cap can leave you with nothing for the rest of your working life.
- The tax relief. This is one of the few insurances in Ireland where premiums qualify for income tax relief at your marginal rate, on premiums up to 10% of your income. For a higher-rate taxpayer, that cuts the real cost by up to 40%, so a €100 monthly premium can come down to around €60 after relief. The benefit, when it is paid, is taxed as income.
A particular point for company directors
If you run your own company, executive income protection lets the business pay the premium as a deductible expense, with no Benefit in Kind charge for you as the director. For directors, whose income often carries the household and whose absence can also put pressure on the business, it is frequently the most tax-efficient way to secure cover. It sits naturally alongside the pension planning most directors are already doing.
Protect the engine, protect the plan
The message running through The New Retirement Reality is that a confident retirement is one you reach on your own terms, at a time you choose. Every part of that hinges on your income continuing uninterrupted between now and then. Saving hard into a pension while leaving that income unprotected is building a house and skipping the foundations.
The reassuring part is that this is straightforward to put right, and cheaper after tax relief than most people expect. It usually takes a single conversation to get the right cover in place.
Protect the income your retirement depends on
At Riordan Financial we advise on the full range of income protection, from individual cover for employees and the self-employed to executive arrangements for company directors, and we make sure it fits alongside your pension and wider financial plan rather than sitting in isolation.
If you want to protect the income your retirement is built on, contact Riordan Financial for a review. Visit riordanfinancial.ie to learn more.
This article is for general information only and does not constitute financial or tax advice. Tax treatment depends on individual circumstances and may change. Figures are correct as of 2026. Riordan Financial Brokers Ltd trading as Riordan Financial (C30375) is regulated by the Central Bank of Ireland.