Should you be paying into a Pension? When asking yourself this question, consider the following;

• If retired could I live on €243.30 per week? (current amount of the full old age pension)
• Would I like to pay less tax?
• Do I want my money to work for me?

Let’s face it – planning for your retirement can seem very complicated and something that’s easy to put off until a later date. But the simple fact is the earlier you start the better. It allows you to make more contributions and more time for your investment to grow.  The choices you make today will impact on the income and lifestyle you have when you retire.

So could you live on €243.30 per week?
If, for example, your current weekly wage was €600 this would equate to a 59.5% drop in your household income. Could you manage? Granted, by the time you retire your outgoings may well have reduced – your mortgage will most likely be paid off, your children may have flown the nest or have families and homes of their own – but you will still be some way off a decent standard of living with only the state pension to live off. So, if the idea of managing on the state pension alone worries you, you need to start planning for your future now.

Paying less tax
No one likes to pay tax but did you know pensions are the most tax efficient way for you to save for an additional income in your retirement?
The three ways which a pension can save you tax are:

Tax Relief
At your marginal rate as you contribute to your pension. For every €100 you invest in a pension, the real cost to you after tax relief is less:
€80 if you pay tax at 20%
€60 if you pay tax at the top rate of 40%

Tax Free Growth
On your money whilst invested. If you put your money into a savings account or invest in stocks and shares, you will pay tax on every euro of income or capital growth. Your pension fund grows tax free.

Tax Free Lump Sum
Tax free lump sum at retirement. Under current rules you can take a percentage of your fund tax-free on retirement with the rest paid to you as a regular income or reinvested for draw down in the future. Selecting which is the best option for you requires professional advice.

Making your money work for you
To answer the final question, making your money work for you, the difference between growth in your pension fund and the growth in your non-pension savings and investments comes down to interest rates and the tax incentives listed above. With the bank interest rates close to 0% leaving money on deposit effectively means losing money, so its common sense to at least look at alternative options.

Many are wary of pension investment, unsure of how it works, however, it doesn’t need to be a scary. Your financial advisor will help you analyse your situation, explain and discuss your options, and advise how you might invest your money to best meet your realistic expectations come retirement.

Pension for PAYE workers
If you are a PAYE worker, you need to be aware that the pension landscape in Ireland is changing. You may have recently heard the government announcing that they are looking to introduce an auto enrollment pension scheme for workers who are not members of a private pension scheme. How much you will have to pay in, how it will be managed and who will administer the funds is still undecided, but the pension landscape is changing.

So why not take control of your own financial future?
Speak with a financial advisor who can guide you through each of the steps, help answer the important questions, and demonstrate that having a private pension can be one of the smartest financial decisions you can make.

If you already have a pension but are unsure or want to learn more about how it is invested or performing, or if you are in business and looking for a pension for yourself or a group scheme for your employees, your financial advisor can offer you the independent pension advice you require to ensure that your pension plan meets your needs.

Why Choose MLMG Financial Brokers

At MLMG Financial Brokers we believe in keeping it simple.  Put simply financial planning is ensuring that you are as well prepared as you can be to meet the financial demands that will face you at different stages of your life. We provide honest expert financial advice in a way that is easy to understand. Every client, big and small, is treated the same; you will be advised on the basis that we are standing in your shoes. We will take the time to ensure you fully understand your finances and your financial needs. We are not tied to any particular provider so we advise on all the main provider products and with over 60 years’ of combined experience in financial services, you can trust our expert, impartial advice.  Contact us today or call us on 07493 21420 for your no-obligation consultation.

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