Top Tips for Starting a Pension

Starting a pension

Having a pension is an ideal safety net to ensure that when you retire, you can lead a comfortable lifestyle. Retirement may feel like a lifetime away now, but the later you leave it to start saving, the more difficult it will become to save a sufficient amount. Today is the perfect time to start your pension if you haven’t already…

Ireland currently has the third largest pension gap in Europe1.  Pension gap is the difference between what people expect to live off financially in retirement versus what they can expect based on what they are currently contributing towards their retirement.

We recommend talking to a financial broker to calculate how much you need to be putting into your pension from today to ensure the retirement you  deserve or to get you started on your pension journey.  

The Irish state pension is currently €238.30 a week2, an amount that most would find difficult to survive on, especially if you’re hoping to take that round the world trip, or Caribbean cruise you’ve always been dreaming of!

We’re here to help as best we can, so here are some tips to get you and your pension started:  

 

1.       Get some advice

As a general rule of thumb, you should aim to provide yourself with a pension income that is equal to about two-thirds of your annual earnings just before you retire. 

We all have different needs, prospects and options and our pension needs can be as individual as we are. An hours’ meeting with a financial broker could be time well spent, as they can provide you with expert advice.   Don’t have a Financial Broker? You can find your nearest using our online geo-locator tool.

 

2.       Avoid a gap or shortfall

Your financial broker will discuss with you exactly how much you will need to contribute to avoid a pension gap or shortfall when you retire. From this, you can create a budget of  contribution requirements per month or per year and what expenditures may have to decrease to allow for sufficient pension savings. Our simple and smart Pension Gap Calculatorwill help you estimate what you need to set aside in order to have the pension you’re aiming for when you retire.

 

3.       Plan for inflation

It is unfortunate but you must prepare for the effect of inflation on your retirement contribution. Every euro you pay into your pension plan will likely have less spending power in the future. One way to alleviate this is to contribute the same percent of your earnings into your plan every year. If your salary increases to match inflation, then you will automatically be paying in more money to your plan.

 

4.       Think about investments

There are various ways you can invest your pension, such as currency, bonds, shares and property. Each option will offer different levels of risk and potential growth. Your financial broker will help you to assess your personal risk level, and which investment option fits with your hopes and plans for your retirement.

 

5.       Review and assess

Once you start making contributions to your pension, it’s important that you review and assess its performance each year – your pension provider will send you an annual statement, and most companies provide online portals where you can view your details and get an up to date valuation.  This not only helps to keep you on track but also gives you peace of mind.

 

Did you know?

The Irish Government is doing its part to encourage its citizens to save for a pension and currently offers three valuable tax incentives (subject to Revenue limits):

  • Tax relief on the money you pay into your pension
  • Freedom from tax on any investment returns which your pension plan achieves
  • The chance to redeem part of your pension as a tax-free lump sum upon your retirement.

 

These are the perfect incentive to get started on your pension, so don’t let anything hold you back!

For more information contact your financial broker or call us in Dublin or Galway on 1890 24 22 27.

 

Sources:

1Aviva’s Mind the Gap, [SO1] [AH2] 2016

2 Citizens Information Ireland, 22nd September, 2017

 

Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules. Aviva Life & Pensions UK Limited, trading as Aviva Life & Pensions Ireland, is also regulated in the UK: by the Prudential Regulation Authority for prudential rules and, to a limited extent, by the Financial Conduct Authority for applicable UK conduct rules. Registered Branch Office in Ireland (No 906464) at One Park Place, Hatch Street, Dublin 2. Tel (01) 898 7000. Registered in England (3253947) at Wellington Row, York, YO90 1WR. © 2015 Aviva.


 [SO1]Customers may not understand the abbreviation – I would use full name,

 [AH2]Agreed, say Mind the gap

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