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Many people do not know what pension funds they have, where they are or what they are entitled to do with them. Some may not have started the pension process at all due to time restrictions or information overload. Here are some very typical scenarios we see every day and sample solutions to each one. Further down, you will see information relating to how much you might need to spend, how your pension can be used when the time comes and the benefits to starting as soon as possible.

As an independent firm, we provide tailored advice according to an individual’s personal circumstances. We work with the following institutions in relation to retirement planning:

Zurich | Standard Life | BCP Asset Management | Wealth Options | Aviva

 

Sample Scenarios

sample-scenarios
I am 30 years of age and have no pension savings whatsoever.
It might seem unrealistic to say to you that you will wish to fund for c. €2m for your retirement. If you are a GP, Registrar or Dentist you may have HSE benefits that we need to take into consideration. To begin with you may wish to save between €500 and €1000 per month into a pension for yourself which at 6% growth would give you between €500,000 and €1,000,000 at age 65.
sample-scenarios
I am 45 years of age, I have some pension savings but not enough.
The most common age that we see people concerned about their funding is from age 40. This is also the period where lifestyle costs such as family and mortgages can be at their highest. If you have funded somewhat akin to the 30 year old above you are in a string position although it may not feel like it. If not then it may be a good idea to see what is affordable for you to fund on a monthly or annual basis.
sample-scenarios
I am 60 years of age, I have pensions with several different companies.
This is a very classic example of someone who has been diligent in making pension contributions to save tax, without particularly paying attention to how it will be used in the future. Now is the time to see exactly how these funds are invested, when they will mature and how you can use them to your benefit.

 

How much will I need saved up before I can retire?

This is a difficult question to answer as it’s really up to the individual as to how much of a pension they would like. As a rule of thumb, generally people like to still receive at least half of their income post retirement. If we assume that on average our clients earn €120,000 at retirement then they will require an income of €60,000 per annum thereafter.

The state pension is now only €11,960 and for many this will only kick in at age 68. This leaves a remaining requirement of €48,040.


So, let’s assume you have saved a pension fund of €1,000,000 at age 65. What can you do with it?

Firstly you are allowed to take 25% in cash. You will pay some tax on this withdrawal but will still be left with €240,000.

The remaining €750,000 will be used to provide you with an income. You can then choose to just take the growth on it (or no less than 4%, see above) or you can decide to make some assumptions and withdraw at a higher level than it is growing by until the funds are used up.

So, if we assume you wish to take 6.5% from the fund and that the fund grows at 5% net, the fund will last you until you are 93. This will satisfy the requirement of the additional €48,000 needed to bring the pension to €60,000 per annum.

See More Detail About Pension Entitlements Here..

 

Benefits To Starting Early – Turning Tax Into Savings

Because your pension contribution is an ‘allowable expense’ in your tax bill, writing a cheque for it it is deemed to be a legitimate business cost for you. As such, even though you own the pension fund that you are paying in to, it is still treated as a business expense for you and reduces your taxable profit in that year.

Here are the percentages of income you can contribute to your pension, only €115,000 is allowed.

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Read additional information about tax relief here..

 

If you would like to discuss your pension options or to review an existing portfolio, fill in your details below and an advisor will be in touch.

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