Guide to Pensions

Generally, people are living longer and leading more active lives in retirement. As a result, it is more important than ever for you to think about where your income will come from when you retire. Your State pension will provide you with a basic level of retirement income, provided you qualify. When planning for retirement you will need to decide whether this is enough to live on in retirement and if not where your additional income will come from. It is important for you to take control of your retirement planning and make decisions regarding your pension.

Broadly speaking, most peoples’ pensions come from one or more of the following:

  1. An occupational pension scheme (also known as a company pension plan
  2. A PRSA (Personal Retirement Savings Account)
  3. A personal pension plan (RAC – Retirement Annuity Contract)
  4. The State pension

The type of pension which relates to you generally depends on your work situation, you should talk to your employer, trade union, colleagues, financial advisor or friends and check out our 'What are my pension options?' booklet.

Who will look after you in your retirement?

The current State social welfare pension is €230.30 per week or

€11,976. per year (as of Jan 2010)

…….will this be enough for you to live on ?

Eight out of ten people taking part in The Pensions Board Consumer Research said that the State pension would not meet all their needs in retirement.

Where will your additional income come from when you retire?

The Facts

  • Only 54% of the adult Irish workforce over thirty years of age
  • Only 56% of men in the Irish workforce
  • Only 50% of women in the Irish workforce
  • Only 45% of those working in the agriculture industry
  • Less than 25% of those working in
    - a seasonal / part-time capacity
    - the catering and tourism industries

….…have private pensions (Source: CSO Survey Dec 2005 & Pension Update 2008)

Living Longer

The average person retiring tomorrow aged 65 years has a life expectancy of between 20 – 23 years, that’s a significant amount of time to enjoy in retirement.

It takes a long time to save for retirement and the earlier a person starts to contribute to a pension, the better.

For those who switch off at the first mention of pensions, it’s time to get informed.

Starting a new job? – ask about your pension !

Did You Know

  • By law your employer must provide you with access to a PRSA, where there is no company pension scheme in place or where you can not fully access the company pension scheme, regardless of whether you are in full-time, part-time, temporary, contract or casual employment.
  • You are legally entitled to information about your employer’s pension scheme or your PRSA, thanks to the Pensions Act.
  • You can save for retirement even if you are not working through a PRSA.

Information Booklets

The Pensions Board publishes a wide range of very practical information booklets on all aspects of pension related issues.

All these booklets are available free of charge and can be ordered from the Board's Information Unit at info@pensionsboard.ieor Lo-Call – 1890 65 65 65 or can be viewed and downloaded here from the Board’s website www.pensionsboard.ie

 
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Pensions Board - Engage with your Pension

About the Pension’s Calculator

  • This pension’s calculator is designed to give a broad indication of the level of contributions required to give your desired pension at your retirement age. This calculator only provides a sample indication of the funding contributions for your pension and no reliance should be placed on it.
  • This calculator does not take into account any contributions an employer might make to your pension.
  • Do you know that contributions paid to a pension scheme will benefit from income tax relief at your highest rate of income tax? This calculator takes into account current income tax relief benefits.
  • For a full and accurate assessment of your personal finances and any tax relief you may be entitled to on your pension contributions always consult with a professional financial adviser

The next step is to talk to your employer, trade union, bank, insurance company, building society or financial advisor about starting your pension today.

Pension Calculator Notes:
  1. Assumptions used: Investment return will be 5% per year before retirement and 4% per year after retirement. Salary will increase at 3% per year. Pension will increase at 2% per year in retirement. The State Pension will increase in line with salary increases. Spouse's annuity assumes a 3 year age gap between the Main Life and Spouse. Your personal illustration above makes an approximate allowance for the recently introduced Pensions Levy (i.e. 0.6% of your Fund Value) until 2014 or your intended retirement year if earlier.
  2. Contribution amounts shown will increase each year as salary increases.
  3. The actual pension at retirement will depend on actual investment return and salary inflation up to retirement and on the cost of purchasing annuities at retirement.
  4. Tax relief calculations take account of age related limits on tax relief in any given year as prescribed by the Revenue. Your financial advisor will be able to help you to stay within your limits. The maximum tax relief as a % of earnings are as follows:
         Under 30: 15%
         30 to 39: 20%
         40 to 49: 25%
         50 to 54: 30%
         55 to 59: 35%
         60 and over: 40%
  5. Contributions or benefits may exceed limits prescribed by the Revenue. Your financial advisor will be able to help you to stay within your limits. Budget 2011, introduced a Standard Fund Threshold (SFT) of €2.3 million. Individuals with pension funds in excess of this value as at 7 December 2010 may apply for a Personal Fund Threshold(PFT). When the capital value of pension benefits drawn down by an individual exceed his or her SFT or PFT as appropriate, a tax charge of 41% is applied to the excess fund.
  6. In these net contribution calculations, PAYE & single persons tax reliefs and single persons tax bands are assumed. It is also assumed that no other tax reliefs apply.
  7. The annuity rate used to convert your pension fund at retirement age is a long term average annuity rate, which makes no allowance for the recent gender equalisation ruling. The annuity rate used in your personal illustration above will be shown when you run the calculator.
  8. This calculator takes account of the fact that the State Pension (Transition) will no longer be paid from 1 January 2014. This means that there will then be a standard State Pension age of 66 years for everyone. If you have qualified for the State Pension Transition before 1 January 2014 you remain entitled to it for the duration of your claim (1 year). State pension age will increase to 67 in 2021 and to 68 in 2028