We can help you:
Why start a pension?
Client Case Study
Name | Orla
Age | 37
Orla is a Senior Executive for an Irish company. She approached us following hearing about us on the radio. Orla’s company had agreed to fund a pension for both her along with another executive in a similar role.
After discussing contributions and finalising everything with her employer, Orla and her colleague were set up with Executive Pension Plans. The contributions to both their pensions were fully funded by their employer and were deductible for Corporation Tax as a business expense.
Both Orla and her colleague’s pension will enjoy tax-free growth. They may also be eligible to withdraw part of their pension funds on retirement as a tax-free benefit.
Client Case Study
Name | Niall
Age | 33
Niall approached us at the beginning of 2021 looking to start a pension. He had been researching the benefits and was in employment that didn’t offer the option of joining a pension scheme.
Niall met with an advisor and discussed his whole financial situation and decided to proceed with starting a pension.
As Niall currently pays income tax at the higher rate of 40%. This meant for every €100 contributed to his pension Niall would receive 40% tax relief. In simple English, €100 contribution would only cost €60.
Niall’s pension will also grow free of tax. He may also be eligible to withdraw 25% tax-free on retirement.
If your situation is similar to either of the above and you would like to assess your options, feel free to contact our team.
6 out of 10 people in Ireland do not have a pension.
With the State pension coming under scrutiny as of late, these numbers are worrying.
The Pensions Commission issued a striking warning to the Government recently. It state whereas there are currently 5 working people for every 1 person to retire over 65.
This will plummet to 2.3 people for every one by the year 2051.
We know 30 years in the future can seem like an eternity
However, with the State pension already at a modest €248 per week, any decrease could have huge consequences.
It is important we plan for the future and starting a pension has many benefits.
If you would like some information about how to get started, feel free to contact our team.
Table of Contents
How do I start a pension plan?
We know, pensions can be confusing. We all know we should have one but it’s tough to know exactly where to start.
Do you know when the best time to start a pension is? Today!
It is never too late (or too early) to start a pension. Our advisors take a non-jargon approach and will be happy to chat and guide you through the process.
Choosing a Pension Plan
There are many different options on the market and again, deciding the right choice can often be overwhelming and down right confusing. If you are an employer or employee, an experienced investor or a novice, we can help decide what pension plan works best for you.
Personal Pensions – Self Employed, or if the employer does not over an occupational pension scheme.
PRSA – Personally owned pension allowing you save for retirement.
Retirement Bond – A retirement bond allows you to take pension benefits when changing employment, without having to transfer to your new employers scheme.
Executive Pension – Suitable for company directors/owners.
Group Schemes – If you are an employer and would like to set up an occupational scheme.
How do I pay my contributions?
Your pension contributions are calculated on your earnings. You will receive income tax relief against your earnings from employment for your pension contributions.
Depending on your age, you will fall into a specific bracket that has a threshold limit that is directly correlated to age. The maximum earnings that can be considered for tax relief are €115,000 per year.
Below is a breakdown of the thresholds and how they change depending on age.
|60 or over||40%|
What happens if I die before I retire?
Not most exciting topics, but it is important you know exactly what happens to your pension on your death.
However, the rules regarding your pension on death will depend what type of scheme you are in.
Luckily, we have taken the time to break down each scenario here.
Pension Tax Relief Benefits
If you are on the tax rate of 20% and invest €100 per month you will receive tax relief of 20% from Revenue at source.
If you are on the higher tax rate 40% and invest €100 per month you will receive tax relief of 40% from Revenue at source.
Invest €100 per month
40% Tax Rate
40% Tax Relief on €100
€100 – 40 = Total Cost €60
Invest €100 per month
20% Tax Rate
20% Tax Relief on €100
€100 – 20 = Total Cost €80
Experienced Financial Advisors
We work along side a team of fully Qualified Financial Advisors who between them have over 100 years of combined industry experience. We know, that is quite a lot! On that note, recruiting an experienced advisor will make the whole process a lot smoother and put your mind at ease.
Everyone is different and has a different set of circumstances. There is no one-size fits all approach when it comes to financial planning. Why not contact our team today and arrange a consultation where you will be provided information on what options are available and most suited to your needs.
Pension Calculation Example
|Your current annual gross salary||€35,000|
|Your intended retirement age:||68|
|Target Pension as a % of pre-retirement salary||€17,500|
|How your Annual Target Pension is Made Up||Your Personal Pension From 68|
|Projected Pension from your Current Pension Arrangement|| |
€ 0 p.a.
|Current State Pension||€12,912 p.a.|
|Projected Retirement Pension||€12,912 p.a.|
|Projected Pension Shortfall to be funded||€4,588 p.a.|
Total Target Pension in retirement
Based on the assumptions as per ‘pension authority calculator’, you are not expected to meet your target pension of €17,500 p.a. in retirement. You will need to your total annual contributions to 9.8% of your Salary so you can meet your target pension.
There is always the option to reduce your target pension in retirement or retiring at a later age. To put a long-term plan in place it is always a good idea to seek advice from a qualified advisor, who can explain the process, targets etc in simple English.
Always bare in mind, the longer you leave it to start a pension, the more you will pay.
An example of results as per the pension calculator. All results are received from the Pension Authority.
Please find the source below and assess your options or goals.
Your accumulated retirement fund is converted to an annual pension using long-term average conversion rate as per the ‘pension authority calculator’. In addition, the actual conversion rate at retirement may change or differ from the conversion rate above!
All figures are of December 31st 2020.
|The Age You Start Your Contributions||Age 35||Age 40||Age 45||Age 50|
|Yearly as % of Salary||9.8% p.a.||12% p.a.||15.2% p.a.||20.3% p.a.|
|Yearly Contributions||€3,430 p.a.||€4,200 p.a.||€5,320 p.a.||€7,105 p.a.|
|Gross per Month||€286||€350||€443||€592|
|Less Tax Reliefs||(€57)||(€70)||(€89)||(€118)|
|Net Contributions Per Month||€229||€280||€355||€474|
Source: Pensions Authority
Benefits of Starting a Pension
The growth of your fund will be completely tax free.
As per legislation, many can access a 25% tax free lump sum.
Did you know that the average wage in Ireland is approximately €41,000 which equates to €797 per week (source: cso.ie). The state pension is currently €248 per week. in conclusion, that leaves a shortfall of €27,500 per annum or €549 per week.
Start planning for your retirement today. A pension is a vehicle for tax efficient savings. in addition, you can get tax relief up to certain limits on pension contributions you make. For example, those 60 or over are eligible for tax relief at 40% (source: pensionsauthority.ie).