We have now entered into what the financial services sector calls ‘Pension Season’.
It is the time of year that self-employed people make their tax returns to Revenue and also make pension contributions in order to reduce their tax bill. For that reason, the television, internet and radio are filled with pension advertisements.
Companies are competing for business and offering special incentives, which means that now is a great time to think about contributing to a Personal Pension Plan.
The National Pension Policy Initiative advised that each person should aim that their income in retirement is 50% of the income that they earn during their working life. From the 26th March 2018 the personal rate for the State Pension for people under 80 will increase to €243.30 per week. That means the State Pension will provide an annual income of €12,651.60. If your current income is €40,000 a year, using the guideline from the National Pension Policy Initiative your financial aim should be that any personal pension arrangement provides you with an income of €7,348.40 each year on top of the State Pension.
If you are not currently paying into a pension plan I strongly recommend that you consider starting a monthly contribution now, no matter how small. Every 10 years you delay starting to save for your retirement means that you double the cost of how much you need to put away in order to get to the same place when you reach retirement age.
There are excellent advantages for you when paying into a pension plan. Firstly, you will not be able to access the funds until retirement age, so you will not end up dipping into your ‘retirement savings’ for every day wants and needs. Secondly, you will get tax relief at your marginal rate on any contributions you make to a pension. So at the very minimum, if you pay tax at the lower rate, paying €100 per month into a pension would only reduce your earnings by €80. Finally, the money invested in your pension will grow tax free, so it will be easier to accumulate growth compared to investing in a personal deposit or investment where the growth is being taxed on an ongoing basis.
Contact an Independent Financial Advisor who will be able to give you advice on your own specific circumstances.
Marie Carr QFA is a qualified financial advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on firstname.lastname@example.org