Thinking About Starting A Pension?

15 September 2021

As we emerge from the Global Pandemic which brought so much sadness for many and financial hardship for most; people are slowly becoming more positive. Rather than thinking day-to-day as we have been for the last 18 months, it is apparent that people are starting to plan for their futures again.

Covid forced many of us to cut costs in order to save money as the world went into survival mode. More recently, however, I find things have turned and more and more clients now want to discuss retirement planning. It has come back to the forefront as many have returned to work and have some financial reprieve to allow them to look ahead and plan for the future again.

I often hear the question “are pensions worth it?” and my reply is always the same – “ask a 65-year-old who hasn’t paid into a pension and see what they think?”! Personally, I have no doubt that pensions are worth it but then again, I would say that!

Many people do not believe in pensions and feel they would be better served making their own arrangements by simply squirrelling money away in a private savings account. However, if you have money that you intend to save for retirement, there are undeniable benefits to investing, specifically in a pension product.

Firstly, you receive tax relief at your marginal rate on any contributions you make to a pension. If you are a lower rate taxpayer you receive tax relief of 20% but if you are a higher rate taxpayer you receive 40% tax relief. So, at the very minimum, a lower rate taxpayer making a pension contribution of €200would reduce their income by just €160. The higher rate taxpayer’s income would reduce by €120 in order to contribute €200 to a pension.

Secondly, the money invested in your pension grows completely tax free, so it is easier to accumulate growth than if you have a personal deposit or investment where the growth is being taxed at 41% on an ongoing basis, with nearly half of your growth being wiped out at regular intervals.

Thirdly, you will not be able to access the funds until retirement age, so you will not end up dipping into your retirement savings to pay for a last-minute holiday!

Obviously the earlier you start a pension the better as you will only need to regularly save a small amount to build a decent sized fund at retirement. However, it is never too late and put it this way, some pension is always better than none! If you haven’t started saving for your retirement yet, you should contact your Financial Advisor who can explain all the contracts available to you and recommend the one which best meets your individual needs.

Lisa Doherty BBS QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on lisad@jfl.ie

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