Pensions for Beginners

What is a pension?

A Pension, simply put, is a long-term savings plan to build up a lump sum of money for you to live off in retirement.

Why should I save into a pension?

To ensure you can live comfortably in retirement, as the state pension alone may not allow you to do so. Most experts suggest that you need a pension of at least half your pre-retirement income to live comfortably in your retirement years.

Tax relief is another reason to save into a pension. You will receive income tax relief on contributions made to your pension. This means if you pay tax is 20% a €200 pension contribution each month will only cost you €160 after tax. If you pay tax at 40%, a €200 contribution will only cost you €120 after tax

State pension ticking time bomb

The State Pension is paid out of taxes collected by Revenue, and currently there are five workers to every one person over the age of 65. However, by the year 2051 this will fall to just 2.3 people for every one person over 65. This suggests that there will be less of a tax take to go around and therefore you should make your own provisions to supplement whatever State Pension will be there when you retire.

Start saving early

People will often neglect the advice to start a pension from an early age. There are several benefits to starting a pension earlier. One of the main benefits to starting early means you can start with smaller contributions and still make a large pot at retirement. As shown below


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