How Much To Save?
When you join the company pension plan you will need to think about how much you should save. The amount that is contributed into your pension plan and the investment growth will determine the size of the pension fund you have in retirement. This in turn will influence the standard of living you will have in retirement.
If you will have no other form of income in retirement apart from your pension, then the general rule of thumb is to aim for a pension that is equal to about half your current salary. This amount will be paid, along with the State pension that you should be entitled to at retirement.
If you're aiming for a pension income of half your current salary, then the amount you need to save right now will depend on how close you are to retirement and whether you are male or female.
Your 'Member Schedule' or 'Member Booklet' will set out the amount or percentage of salary that both you and your employer will need to contribute into your pension.
For example this could be 5% of salary from you and 5% of salary from your employer. It is important to remember that this is just the minimum amount that should be paid into your pension. Unless you are very young when you start to contribute you will need to put extra money into your pension in order to have a pension income of half your salary when you come to retire. Paying more money into your pension is called making Additional Voluntary Contributions or AVCs. See the tables on the pages that follow for more information on how much you should contribute to your pension.
The tables below indicate the total percentage of salary that needs to be saved into your pension plan, based on age and gender, to achieve a pension of approximately half of your salary when you retire. This percentage can be made up by your contribution as well as your employer's contribution. So for example, if you are male and aged 35 and your employer is contributing 6% to your pension you then need to save 16% to make up the required 22% total contribution. This may seem like a lot but the generous tax & PRSI relief available, particularly if you are paying tax at the higher rate, mean that the actual cost from your take-home pay packet will be approximately half of this.
Male - Retiring at age 65
| Start Contributing at age |
% Contribution per annum of salary required for pension of approx. 50% of salary | % Contribution per annum of salery required for pension of approx. 66%of salary |
| Column A | Column B - MALE | Column C - MALE |
| 25 | 16% | 21% |
| 30 | 19% | 25% |
| 35 | 23% | 31% |
| 40 | 29% | 39% |
| 45 | 38% | 50% |
| 50 | 53% | 69% |
| 55 | 82% | 108% |
| 60 | 170% | 225% |
Male - Retiring at age 60
| Start Contributing at age |
% Contribution per annum of salary required for pension of approx. 50% of salary | % Contribution per annum of salery required for pension of approx. 66%of salary |
| Column A | Column B - MALE | Column C - MALE |
| 25 | 22% | 29% |
| 30 | 28% | 36% |
| 35 | 35% | 46% |
| 40 | 45% | 59% |
| 45 | 63% | 83% |
| 50 | 97% | 128% |
| 55 | 202% | 266% |
WARNING: The income you get from this investment may go down as well as up. These figure are estimates only. They are not a reliable guide to the future value of this investment. The value of your investment may go do as well as up.
Note: These illustrations assume an investment return before retirement of 6% per year (after charges) and salary/contribution growth and inflation of 3% per year. These rates are for illustration purposes only and are not guaranteed. Actual investment growth will depend on the performance of the underlying investments and may be more or less than illustrated. This illustrated income is assumed to be paid monthly in advance, payable for life (and payable for at least a minimum of 5 years regardless) and increasing by 2% per year during payment. This table is based on annuity rates calculated in line with guidance from the Society of Actuaries in Ireland.
Female - Retiring at age 65
| Start Contributing at age |
% Contribution per annum of salary required for pension of approx. 50% of salary | % Contribution per annum of salery required for pension of approx. 66%of salary |
| Column A | Column B - FEMALE | Column C - FEMALE |
| 25 | 18% | 23% |
| 30 | 21% | 28% |
| 35 | 26% | 34% |
| 40 | 32% | 43% |
| 45 | 42% | 55% |
| 50 | 58% | 77% |
| 55 | 91% | 120% |
| 60 | 189% | 250% |
Female - Retiring at age 60
| Start Contributing | % Contribution per annum of salary required for pension of approx. 50% of salary | % Contribution per annum of salery required for pension of approx. 66%of salary |
| Column A | Column B - FEMALE | Column C - FEMALE |
| 25 | 25% | 33% |
| 30 | 29% | 39% |
| 35 | 36% | 48% |
| 40 | 48% | 63% |
| 45 | 68% | 90% |
| 50 | 106% | 140% |
| 55 | 219% | 290% |
WARNING: The income you get from this investment may go down as well as up. These figure are estimates only. They are not a reliable guide to the future value of this investment. The value of your investment may go do as well as up.
Note: These illustrations assume an investment return before retirement of 6% per year (after charges) and salary/contribution growth and inflation of 3% per year. These rates are for illustration purposes only and are not guaranteed. Actual investment growth will depend on the performance of the underlying investments and may be more or less than illustrated. This illustrated income is assumed to be paid monthly in advance, payable for life (and payable for at least a minimum of 5 years regardless) and increasing by 2% per year during payment. This table is based on annuity rates calculated in line with guidance from the Society of Actuaries in Ireland.
Making AVCs - Paying more into your pension plan
Your 'Member Schedule' or 'Member Booklet' will set out the minimum contribution that you must make, but you have the option of paying extra contributions into your pension fund. These extra contributions are known as Additional Voluntary Contributions or AVCs. AVCs may be a good option for you if you want to increase the value of your pension fund.
AVCs are treated like normal pension contributions for tax purposes. Therefore, AVCs qualify for tax relief at your highest rate of tax. Also, any investment growth achieved by the retirement fund you build up is tax free.
AVCs allow you to take control of your financial future and make sure you have an adequate fund built up when you reach retirement. The value of these AVCs is added to the value of your main pension fund to make up a total retirement fund. Part of this fund can be taken as a tax-free lump sum when you reach retirement age, with the remainder used to buy an income for life (also known as an annuity). With an AVC Fund there is usually a further option to convert the fund into an ARF (Approved Retirement Fund) or an AMRF (Approved Minimum Retirement Fund) depending on your income and rules of scheme.
For further information on retirement benefit options including ARFs & AMRFs see the 'What will I get when I retire' section on this site.
How do I pay in single or once-off contributions and get tax relief? For more information download the PDF below
