Pensions in Ireland: Investing in Your Future
Part 2/Pensions provided at work.
In this edition of Pensions in Ireland we will try to unravel some of the mysteries of pension schemes provided by Irish Employers.
Many people working in Ireland are members of some sort of a pension arrangement and many of these people find the schemes complicated, confusing or baffling. So More about Pensions in Ireland is our attempt at unravelling the mystery, or maybe just shining some light on the darkest corners!
So let’s start with some basics:
- Pensions (even work based pensions) are a way of saving money. This is regardless of what type of scheme it is.
- Workplace pensions (sometimes called occupational schemes) have the advantage that your employer might add to your pot.
- You, the employee, can get tax relief on your savings (pension contribution)
- You can get a large portion in a tax free lump sum at the end.
- Your savings in the pension fund grow free of tax before retirement.
- When you retire from work your savings (pension fund) will help you to have a nice lifestyle.
- And, if you are the employer, you also get tax relief on contributions towards your employees fund(s). (Within certain limits)
Types of Schemes:
So here is where things can get tricky. But let’s just focus on the main schemes that exist today and their most important features:
- Where everyone is a member of one scheme. For example O’Sullivan Tyres Employee Pension Scheme.
- Each member has an account within the scheme.
- There is a Trustee or Board of Trustee who oversee the scheme.
- Each member has an individual contract.
- Generally suits small businesses with sometimes only 1 or 2 employees.
- Trustee may be the employer or the pension provider.
- Each member owns their own pension contract and there are no trustees.
Investment and Risk
- Your savings (pension contributions) need to be invested somewhere over the years to grow and hopefully make your retirement more comfortable.
- With Group Pensions the Trustees may decide where your funds are invested and may also give you, the member, some choice in the matter.
- With smaller Executive Schemes or PRSAs the choice is often made at the individual level.
- Different Pension Funds have different levels of risk.
- You, as a member of a scheme, should be aware of how risky (or not) your fund is.
Task for Today:
- Ask your Pension Provider (HR Manager) or whoever looks after your pension, how risky your fund is.
- A pension scheme at work is a great benefit and provides many tax breaks.
- The most important thing however is the impact this scheme has on your future financial life.
- Ask your provider for an update of your benefits and speak to a financial advisor about your likely outcome.
For more information on pensions: https://osullivanfinancial.ie/pension-plans-2
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McCann Financial Consultants Ltd t/a O’Sullivan Financial Solutions is regulated by the Central Bank of Ireland