What Is A Pension

What is a Pension?

A pension plan is a long-term savings plan, where regular amounts and/or one-off lump sums are built up into a fund for retirement. The amounts saved into a pension are called ‘contributions’.  

Pensions & Retirement

Starting a pension plan is one of the smartest decisions you can make. It could help ensure a brighter, better future to look forward to. When you’re choosing a pension, having all the information you need is key. So we’re here to help you select one that’s right for you.

What is a pension scheme?

A pension scheme (or pension plan) is a long-term savings plan that helps you save for the future. A pension plan allows you to make regular payments and/or transfer one-off lump sums into a fund for retirement. The amounts saved into your pension are called ‘contributions’. 

Today, the State Pension (Contributory) in Ireland is worth about €240 per week. We can’t predict what will happen, but we do know that starting a pension can give you greater ownership of your future. Putting a little aside today could help you live an active and productive retirement tomorrow.

Why taking out a pension is important

These days we are living longer than previous generations. In fact, most of us can now look forward to 20 or even 30 years of retirement. A pension can help you plan for these years, whether you want to retire to the country, travel, or spend time with your grandchildren.

The right time to start a pension

The money you save into your pension plan is invested so that your fund can grow over time; this is why the earlier you start a pension plan, the more time your retirement fund will have to grow and the bigger your pension pot will be.

Tax relief on pension contributions

Unlike a regular savings account, money invested in your pension can earn important tax breaks. And when you retire and look for access to your fund, the benefits of your pension can be available in a tax-efficient way. Check out our personal pension tax relief calculator to see the tax benefits available to you.

Age-related percentage limit for tax relief on pension contributions

Age Percentage limit

Under 30  15%

30-39 20%

40-49 25%

50-54 30%

55-59 35%

60 or over 40%

Total earnings limit the maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

Section 790A Taxes Consolidation Act 1997 (TCA) provides that an aggregate earnings limit applies for the purposes of giving income tax relief to an individual on contributions made to certain pension products (see below). This limit is currently €115,000.

Occupational & Statutory Pension Schemes, Retirement Annuity Contracts, PRSAs and Qualifying Overseas Pension Plans.  The reference to “personal pension plan” applies to a Retirement Annuity Contract (RAC) and/or a Personal Retirement Savings Account (PRSA).

Finding the right pension

There are a few factors to consider when choosing your pension plan, such as your employment status, whether you’re an investor or a novice and your attitude to investment risk. Whatever your personal circumstances are, we can help you choose the type of pension that works for you.

What your pension will be worth

The value of your pension at retirement depends on how much you can afford to put away each month, the length of time you are making contributions, the type of pension plan you select and the investment return. One thing we know is that the sooner you start a pension, the bigger it should grow.

Starting your pension

Starting a pension is the first step in a journey that could last for 40 years or more. A lot can happen over 40 years, and we’ll be there to help you manage your funds so you can enjoy your retirement.

How much should you put into your pension?

How much you should contribute to your pension will depend on your specific circumstances. When deciding how much to save into your pension, it’s important to think about how much you can afford, but also to take into account how long you’ve got until retirement and what kind of income you think you’ll need during your retirement, based on the lifestyle you would like to have and how long you expect to be in retirement.

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