Have you started your pension yet?

If not, now is the time to put the wheels in motion and start a long-term savings account so you can aim for your dream retirement.

Setting up a pension now will give you peace of mind as the years roll on. You can choose to put money into investments of your choice and save more with tax benefits, if eligible. It’s not just another expense - a pension is a smart saving option that could make for a brighter financial future.

Is it too late to start a pension?

While the fund value can go down as well as up, the earlier you start a pension, the more time there is for your savings to grow.  But even if you start a pension in your 40s or 50s, you could still put away a sizeable sum to help down the line. Once you retire, your pension is how you’ll provide for yourself. How financially comfortable you will be during retirement depends on how much you can save during your working life.

In Ireland, there is a contributory state pension of around €13,000 (The Pension Authority, 2021) a year which doesn’t kick in until you turn 66 (from 2028, the age is set to increase to 68).  The amount you receive as a state pension will depend on your number of Pay Related Social Insurance [PRSI] contributions. There is also a non-contributory pension for people who haven’t enough PRSI credits, but that pension is means tested.

Starting early and saving smaller amounts is a great option – you won’t notice the savings pinch and you can feel secure knowing you are looking after your future self.

Should I start a pension?

Retirement might seem like a distant prospect, but it is something you need to prepare for so yes, starting a pension is a smart idea. Don’t think of a pension as an expense, but rather an investment in future you.

While you don’t have access to your pension benefits before you retire, it can be very satisfactory to see your pension pot grow over time. You can’t take the money out easily for frivolous spending, so it’s more protected.

How do I start a pension?

The first step is to talk to a financial advisor. That’s where we can help – fill out the form at the bottom of this page and one of our friendly advisors will arrange a meeting at a time that suits you. The benefit of talking to an advisor is that they will help make sure your pension plan is suited to you and your needs.

In the meantime, have a look at this pension calculator from Irish Life Assurance and work out what your pension could be at retirement age if you start saving today.

At what age can I start a pension?

The earlier you start, the more you could save, resulting in a bigger pension pot.

For example, you could contribute 25% more to your pension pot by starting at the age of 25 as opposed to waiting until you’re 35.

Based on the assumptions outlined below you might be losing out on 25% of your retirement income by waiting ten years to set up a pension.* (Irish Life Assurance, 2021)

Let’s take the example of Sarah, aged 25, and Lucy, aged 35. Both have set up a pension in 2021 into the same pension plan. For both Sarah and Lucy, contributions are 14% per annum (their employer pays 7% and the employee pays 7%).

Their pension strategy is the exact same but because Sarah has started ten years earlier, she can add 25% extra to her pension pot over time.

Using this example, you can see the difference in your pension fund when starting earlier. No one wants to miss out so it you haven’t yet made pension plans, it’s time to get serious.  

* Assumptions: The fund choice for both Sarah and Lucy is a pension strategy.

Charging structure is the same for both and neither have any previous pension funds. It’s assumed that the growth rate is between 2.75% and 2.83%, salary growth is 1.5% and inflation is 1.5%.

This is the projected pension that the member could get if they converted all their pension fund into an annuity, retiring at the age of 65. Fund at Retirement times Salary: This is comparing the projected fund available at retirement (in today’s prices) over their current salary.

Discover your pension options

What you need to know about PRSAs

A Personal Retirement Savings Account, or PRSA, is a pension plan that you own yourself. It’s a contract between you and your pension provider.

A PRSA is a flexible and portable pension that you can bring with you if you switch jobs - one of its major advantages.

You can have a PRSA whether you are employed, self-employed or unemployed. The minimum amount you can add to your PRSA per year is €300, but there is no maximum amount. If your job or financial means change, you can reduce, increase, or stop your contributions.

Plus, you may be able to claim income tax relief on your PRSA contributions. The amount differs depending on your income and your age. A financial advisor can work out how much tax relief you can claim in your personal circumstances.

The inside track on company pensions

A company pension is a pension set up by an employer with a fixed amount paid by employees each month. You can get your contribution set up and you can make additional voluntary contributions (AVCs) if you wish.

Some employers also contribute, employer contributions are one of the major benefits of a company pension.

With Irish Life Assurance, you have two options when deciding how your pension is invested – ‘Be My Guide’ and ‘I’ll Decide’. With Be My Guide, Irish Life Assurance will carefully manage your pension, and your funds will be moved to lower risk investments as the years go on and you are closer to retirement.

With I’ll Decide, you can pick and choose where the funds go yourself – whether it’s cash, bonds, shares, or property, for example. I’ll Decide is suitable for people familiar with managing investment risks. You should also be aware that with this option your investment savings don’t automatically move to lower-risk investments as you get closer to retiring.

Start your pension today

It’s important to that note that income tax relief is not guaranteed. To be eligible to claim, your income must be taxable either Schedule E or Schedule D (case I or II). To claim, you can apply to your Inspector of Taxes to adjust your tax credits. Contributions deducted from salary will receive immediate tax relief.

If you are self-employed, you must include your pension contributions in your self-assessment tax returns to obtain income tax relief. Pension income in retirement is subject to income tax at your highest rate on withdrawal, Universal Social Charge, PRSI (if applicable) and any other taxes or government levies due at that time.

There are several benefits to setting up a pension and the sooner you start, the sooner you can achieve a nest egg for retirement. Don’t wait any longer, take the first step and learn more about Irish Life Assurance pension products.