Should I start a pension?

Freiheit

I'm unemployed but have a lump sum through inheritance. A lot have advised me not to start now. But the idea of saving E20 per week to assist living when I'm old,in principle makes sense. However a lot of peoples,whose opinions I value have recommended against,money not safe,levies,potentialy further levies/taxes etc.

Would I be better off with the 10 Year Solidarity Bond,at least that's guaranteed at an interest rate that should beat inflation?.

Danke
F

homer911

One of the advantages of a pension investment is the tax relief obtainable

How long have you been unemployed? You can make a claim for tax relief against prior year income

Pablo Sanchez

Dont do anything until your in employment, it makes no sense to do it now when you cannot get tax relief on your contribution. But a pension is a very worthwhile investment.

Jim2007

Freiheit wrote: »

I'm unemployed but have a lump sum through inheritance. A lot have advised me not to start now. But the idea of saving E20 per week to assist living when I'm old,in principle makes sense. However a lot of peoples,whose opinions I value have recommended against,money not safe,levies,potentialy further levies/taxes etc.

Would I be better off with the 10 Year Solidarity Bond,at least that's guaranteed at an interest rate that should beat inflation?.

Danke
F

It is never too early to start saving for your retirement, however you decide to do it. The earlier you start the better the chance you have of accumulating a tidy sum. It is as simple as that! Changes in the tax law, the introduction of levies, the state of the economy or whatever is never a reason to stop saving, although many people seem to think it is! By all means take advantage of tax relieve and so on when you can, but don't let it be the cause of diverting you from the objective of accumulating cash for retirement.

sh1tstirrer

homer911 wrote: »

One of the advantages of a pension investment is the tax relief obtainable

Until the time comes to draw your pension then they will tax it :mad:

Jim2007

Pablo Sanchez wrote: »

Dont do anything until your in employment, it makes no sense to do it now when you cannot get tax relief on your contribution.

How does not saving help someone accumulate money for their later years???

Freiheit

Thanks,without tax relief though would I do as well with a savings account,such as the solidarity bond?.

I inherited a large sum last year and though I'm not working the idea of putting a small portion of that away for retirement and adding to it a little bit on a weekly basis makes sense.

Jim2007

sh1tstirrer wrote: »

Until the time comes to draw your pension then they will tax it :mad:

Of course, it's income! That is the case in all EU countries, why should you expect it to be otherwise??? Furthermore, I'd prefer to have the tax problem, than not have the cash, thank you very much.

Pablo Sanchez

Jim2007 wrote: »

How does not saving help someone accumulate money for their later years???

Hi Jim, when did i say not to save his money?

Leave it in the bank and then when he is back in employment he can start a pension scheme and lodge the money into that, thus taking advantage of tax relief.

yellowlabrador

If you inherited a large sum, you will have to declare it when you are on means tested benefit. If I were you, I'd save in bonds until you get a job, you can then review your situation.

Jim2007

Pablo Sanchez wrote: »

Hi Jim, when did i say not to save his money?

"Dont do anything until your in employment, it makes no sense to do it now when you cannot get tax relief on your contribution."

Pablo Sanchez

Jim2007 wrote: »

How does not saving help someone accumulate money for their later years???

Something i should have said earlier, paying into a pension without the tax relief is basically a very expensive savings account.

Generally speaking bank deposits do not incur managment fees. Pension contracts can have up to 5% annual charges/policy fees/bid offer spread etc.

The solidarity bond does offer a great return, but you need to be prepared to forgo access to the money for the full term, early encashments mean you will only receive a fraction of the benefit.

Pablo Sanchez

Jim2007 wrote: »

"Dont do anything until your in employment, it makes no sense to do it now when you cannot get tax relief on your contribution."

Yes Jim, the question posed by the OP was if it was a good idea for him to put his money into a pension at the moment, my response was very self explanatory, dont put money into a pension until he can claim tax relief.

Any more pedentry up your sleeve this evening?

Jim2007

Pablo Sanchez wrote: »

Yes Jim, the question posed by the OP was if it was a good idea for him to put his money into a pension at the moment, my response was very self explanatory, dont put money into a pension until he can claim tax relief.

Any more pedentry up your sleeve this evening?

The OP never asked about a pension fund, he is thinking about the "Solidarity Bond"

sh1tstirrer

Jim2007 wrote: »

Of course, it's income! That is the case in all EU countries, why should you expect it to be otherwise??? Furthermore, I'd prefer to have the tax problem, than not have the cash, thank you very much.

I didn't say it shouldn't be taxed I was just pointing out that you will be told of the tax break when paying into a pension but you will never be told about it being taxed when drawing it.

Freiheit

Thanks all. I think I'll put it into the Solidarity Bond and let that be a de facto pension pot,it should at least beat inflation,without the fees. Is there much chance that a pension fund would do better?.

I said I'm unemployed but I didn't say I was in receipt of social welfare. I could afford to put a small sum away for my future and it makes sense.

hmmm

I think what people are saying is that saving for your future is a good idea, but locking into a pension (as a vehicle) is probably the wrong move. With a pension, you are locked in and cannot access the funds until retirement. On the plus side, you get tax relief. In your case, there is probably a disadvantage but no advantage.

You can still invest in stocks/shares/funds etc outside of a pension. Rabobank for example offer a range of funds which you can buy and sell at any time you choose. You'll need to do a bit of reading about long term saving - typically if you're young you'll probably want to take on a bit of risk (to try and achieve better returns), but the downside with risk of course is that you could also lose money. In general, the longer your time horizon for saving the more the returns are smoothed out, i.e. you will have ups and downs in the short term, but in the long term you will get a narrow range of returns.

The savings bond product would be regarded as fairly conservative. If you have money to spare that you won't need to access in the next (say) 10 years, it'd probably be worthwhile considering some more aggressive investment options such as funds or even individual share investments.