N00b Pension Question

nellyshark

Hi All,

Mods etc, I hope this is the correct forum.

My query is regarding starting a pension for myself. Im a 22 yo male and have been thinking about pensions/savings for good while now, however, Im not totally sure about how they work.

I have looked at info available on the net from boards, pensionboards, irish life, etc and am still :eek: at the whole thing.


Currently I am in employment until the end of the year in the mid €300s per week. What I would be thinking is contributing around €25/30 a week for a few years while im still relatively young to a pension and a further similar amount to some form of savings scheme (any info here would also be appreciated), like 15-20% of my pay between both. However because I am young with places to go etc is it possible to start such and maybe take a break from such if I am not in a position to contribute and live ?

I also have no idea what my current employers attitute is towards a pension, however, I believe that the office will disband at the end of the year so I am not entirely concernered regarding this but what confuses me here is that employers can make contributions and also tax relief on pensions. Can someone explain?

Also as mentioned above I would also like to contribue some of my wage towards a savings account (I don't even know if this is the correct word) but the only material I have read is Irish Life select bonussave, where a min of €150pm is required, something which is a bit excessive on my wage IMO. Anyways for my projected savings accounts as I would only be considering contributing €25/30 a week but I would not be exactly distraught if this was a completed disaster i.e. at 27/28 ended up with hardly anything, but would like the experience of having such done by my late 20s where I should have more or an idea regarding the future and my savings

Any info appreciated! And anybody reconning that I shouldnt be doing such is also welcomed.

sofireland

Ok, basically you should view a pension as a long term savings account, which you just happen to get tax breaks on.

Eg, a 20% tax payer would get 20 euro relief from the govt for every 100 they put in, also as a PAYE worker you could also claim back the 6% PRSI yourself.

You can go two ways, 1 employer scheme, where they'll stop it out of your wages and may also contribute (find out if they operate a PRSA scheme *this is minimum legal reqd) or a company pension scheme which has rules attached on contributoins. Or you can make your own arrangement through a broker, life company or even your bank. If your contributions are taken direct from pay you save tax and prsi @ source, if from your account you have to claim it back yourself

As you 22 the max the revenue will allow you contribute is 15% of your Salary (Net Relevant Earnings in the lingo here but thats more for Self Employed) So for example if you earned 25000 pa, you'd be allowed to put in 3750 annually and claim your full relief on it.

The earlier your start a pension the better.

The other option you mention is a long term unit linked savings plan which generally would attract higher charges that a PRSA (PRSA fixed @ 5% Premium and 1% Asset Management Charge) where the charges on the other thing could be much more.

Hope that helps in some way

kaiser sauze

Hi All,

Mods etc, I hope this is the correct forum.

My query is regarding starting a pension for myself. Im a 22 yo male and have been thinking about pensions/savings for good while now, however, Im not totally sure about how they work.

I have looked at info available on the net from boards, pensionboards, irish life, etc and am still :eek: at the whole thing.

It is quite normal to be overwhelmed; that is why professional, independent advice is essential.

Currently I am in employment until the end of the year in the mid €300s per week. What I would be thinking is contributing around €25/30 a week for a few years while im still relatively young to a pension and a further similar amount to some form of savings scheme (any info here would also be appreciated), like 15-20% of my pay between both. However because I am young with places to go etc is it possible to start such and maybe take a break from such if I am not in a position to contribute and live ?

Going by the sketchy details here, a PRSA would offer you the flexibility you're looking for. While you take a break, your cumulated fund will continue to grow.

I also have no idea what my current employers attitute is towards a pension, however, I believe that the office will disband at the end of the year so I am not entirely concernered regarding this but what confuses me here is that employers can make contributions and also tax relief on pensions. Can someone explain?

Employers can make contributions, however, they are not legally required to do. The only requirement on an employer is to have a PRSA scheme that all employees can easily access. You will need to ask them which provider they have appointed to do this. You do not have to use this provider, you can start up a private PRSA/pension plan with whomever you wish.

The tax relief is quite straightforward.

If you pay tax @ 20%, which you do, €100 will only cost you €80 from your paypacket. You also get PRSI relief, at whatever rate you pay, on this amount, typically 6%.

€100 contribution - tax relief (20%) €20 - PRSI relief (6%) €6 = €74 nett cost to you.

Also as mentioned above I would also like to contribue some of my wage towards a savings account (I don't even know if this is the correct word) but the only material I have read is Irish Life select bonussave, where a min of €150pm is required, something which is a bit excessive on my wage IMO. Anyways for my projected savings accounts as I would only be considering contributing €25/30 a week but I would not be exactly distraught if this was a completed disaster i.e. at 27/28 ended up with hardly anything, but would like the experience of having such done by my late 20s where I should have more or an idea regarding the future and my savings

In this case I would simply look at the offers from the various institutions for deposits, that way you have flexibility to make withdrawals when you need to. Now is not the time for a product like Irish Life's Bonussaver.

Any info appreciated! And anybody reconning that I shouldnt be doing such is also welcomed.

Anyone who tells you that a pension is not a worthwhile investment, is talking codswallop.

kaiser sauze

sofireland wrote: »

Ok, basically you should view a pension as a long term savings account, which you just happen to get tax breaks on.

Eg, a 20% tax payer would get 20 euro relief from the govt for every 100 they put in, also as a PAYE worker you could also claim back the 6% PRSI yourself.

You can go two ways, 1 employer scheme, where they'll stop it out of your wages and may also contribute (find out if they operate a PRSA scheme *this is minimum legal reqd) or a company pension scheme which has rules attached on contributoins. Or you can make your own arrangement through a broker, life company or even your bank. If your contributions are taken direct from pay you save tax and prsi @ source, if from your account you have to claim it back yourself

As you 22 the max the revenue will allow you contribute is 15% of your Salary (Net Relevant Earnings in the lingo here but thats more for Self Employed) So for example if you earned 25000 pa, you'd be allowed to put in 3750 annually and claim your full relief on it.

The earlier your start a pension the better.

The other option you mention is a long term unit linked savings plan which generally would attract higher charges that a PRSA (PRSA fixed @ 5% Premium and 1% Asset Management Charge) where the charges on the other thing could be much more.

Hope that helps in some way

Only seen this after I posted!

MB74

They say now is the time to start a pension with share prices a rock bottom (we hope) that you will get more unit investment for your contribution. Funny though it just doesn't appear as if we want to do so as a nation.

Also great to here someone is sensible to think about a pension at 22. You possibly retire at 55 while the rest of us are working for another 10 years.

sofireland

You should try mix and match. Use a deposit regular saver to build up cash in the short term. And Pension for the long term for when your old and grey.

They reckon for every 8 years you delay starting a pension you'd have to double you contribution level to get the same fund