Did you know that less than a third of Irish professionals currently have a pension plan? There’s always the state pension though, right? From March 2019, the State Pension in Ireland is €248.30 per week. For many this is a sharp decrease in what they have been used to earning in full time employment, hence the need to supplement the gap with a private pension.
How long can I put off starting my pension?
We all procrastinate from time to time, but when it comes to your pension procrastination there’s a lot to be lost. Starting your pension contributions at age 25 will remove huge pressure from you later down the line. The difference between starting a pension plan at 25 and 35 could be as much as an extra €200 per month. Also the later you leave it to start your pension may mean that you’re essentially playing catch up at a time when you may have more financial responsibility and commitments.
How much do I need in my pension when I retire?
Most people will need about 70% of their income to live comfortably in retirement. This means that someone on a salary of €42,000 will need about €30,000 a year when they retire. People often believe that they won’t need too much when they retire as their children will have flown the nest and the mortgage will be paid off. However the truth is that people’s spending habits don’t actually change dramatically with age, plus they will have a lot more free time to fill once they have retired.
When should I start a pension?
Starting early is also a clever move as it will give your money time to generate higher returns. This is based on the idea of “compound interest”. The longer your money is building up the greater your return should be.
40% Tax Savings
A huge benefit of saving money through a pension scheme is that your pension contributions are tax free. If you’re on the higher tax band of 40%, the net cost to you will be €150 for a €250 contribution to your pension (when tax relief is included). If you are on the lower 20% tax rate you will pay €200 for every €250 contribution.
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