UNDERSTANDING PENSIONS

Whilst talking recently with some people who were working together in an office, they all told me that they ‘didn’t understand pensions’. I was amazed, I thought everyone knew what pensions were. Maybe as an industry we spend too much time talking about funds and structures and other jargon rather than keeping it simple.

Well here goes, my simplified version of what is a pension is and why you should have one.

Firstly a pension is a long term savings plan from which you will receive an income when you retire. Currently if you are working and paying PRSI, you are entitled to a contributory pension of € 238 per week at age 66. (This retirement age is increasing for those born after 1960.)

State Pension Payable
From age 66 from 1 January 2014
From age 67 from 1 January 2021
From age 68 from 1 January 2028

Now for those of you that think that you can survive on €238 a week and not work on, then there is no need to read on further. For those who want to provide for additional retirement income, you firstly need to look at setting up a plan and decide how much to contribute.

The other great thing about pensions is that the government will also make a contribution by means of giving you back tax. Yes you have read that right, the government will give you back tax. A lot of us remember the SSIA savings plan in 2001/2, where the government topped up your savings by 25% on amounts up to € 254, which you were able to draw down 5 years after and most people took it up as we were receiving money back from the government.

They do the same with a pension, if you pay tax at the low rate of 20% for every € 100 you put in yourself they will top this up by € 25. For the person paying tax at the high rate of 40% you will get a € 66 euro top up, 2/3’s of what you pay. So if you want to reduce the amount of tax you pay and want to enjoy a more comfortable retirement then start a pension.

You cannot start a pension soon enough as the earlier you start the more that you will have in your fund at retirement and the less tax that you pay the government. At retirement you can take 25% of your fund tax free, while the remainder will give you an income to supplement the State Contributory pension (that is if the state pension is still there when you retire).

So that’s it, hopefully a simplified explanation of pensions and why everyone should have one.

For further information and advice call me today on 064 663 6410 and I can meet you to go through the plan that may suit you best.

Vincent Casey Life and Pensions Co
8, Newmarket Lane, Killarney, Co. Kerry | Office: 064 663 6410 | Mobile: 087 246 1599
Email: vcasey@lifeandpensionsco.ie

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