Facts & Tax



What happens to my pension contributions?

The pension fund manager invests your contributions (and any made by your employer) in one or more pension funds. These funds are used to buy and sell assets, such as shares, property, bonds and cash (deposits). There are many types of pension fund. Each invests in a different mix of these assets.


When should I start saving for retirement?


The earlier you start the better.


You will have more time to make contributions and more time for your fund to grow in value. The older you start the less time you have to build up your fund so the sooner the better. You will have to pay much higher monthly contributions to give you the same pension you would have had if you started saving in your 20s or 30s.


If you are older when starting a pension, don’t let this put you off, as it is better to have a smaller fund than no fund at all! Remember, as you get older you can get tax relief on more of your income and you may be able to make accelerated contributions.


Make better plans for a rewarding retirement
Planning for retirement should not be left to the last minute, but often is. International research has shown that the more thought and preparation given to retirement planning the more rewarding the experience for the individual and their family. So why do you need to plan:


To make sure you get the most out of all your leisure opportunities once you retire


To understand all the financial planning issues that will impact your retirement


To understand what your social welfare entitlements are in your retirement


To get your personal affairs in order so you can relax




What type of pension plan should I choose?

A. An Employer Pension Plan

An employer pension plan (or occupational pension plan) is one that is set up by an employer to provide pension and other benefits for employees. The main advantage of this type of plan is that your employer must make a contribution to it, even though the amount may be small.

Your employer usually sets up the rules of the pension plan, and appoints people called trustees to look after it. Your employer automatically takes your contributions from your salary before working out income tax. So, you get tax relief automatically because you don’t pay tax on your pension contribution.

What happens if I become ill and cannot continue to work?
Some employers provide an ill-health pension for their employees if they have to retire early because of ill-health. If your employer does not provide these benefits, consider taking out some form of salary protection insurance, such as permanent health insurance (PHI). This type of policy is not the same as a pension but it can replace part of your income for as long as you are unable to work due to ill-health.


B. Personal Pension Plan

These are private pension policies managed by life assurance companies and investment firms. You have to be earning an income or be self-employed to buy one of these plans.

C. Personal Retirement Savings Accounts (PRSA)

This is a special type of personal pension policy that is designed to be more flexible than the traditional Personal Pension Plan. Anyone up to age 75 can take out a PRSA. You don’t have to be earning an income, (although you won’t get tax relief on your contributions unless you have an income).
What happens if I become ill and cannot continue to work?

If you become permanently unable to work due to ill-health and have to retire, you can immediately draw on your pension plan no matter how young you are. As with voluntary early retirement, the amount you get will be much less than if you contributed up to your original expected retirement age because you have paid fewer contributions and these have been invested for a shorter time.

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