Why should you have a pension Plan
Make your future better
A pension is a tax-efficient way to save and invest money in the long term for when you decide to reduce your working hours in later life or stop working altogether. You can choose to start taking your pension money from age 60 (or Normal Retirement Age 65, depending upon pension Plan structure) to help fund your everyday life.
Not every pension works in the same way, so this guide can help make their differences clear, how they work and which option might right for your needs.
Here’s how it works:
You pay in on a regular basis, and if you’re a member of a workplace pension scheme your employer may pay in too.
The amount you get back from your pension will depend on how much has been paid in, your pension’s investment performance and how you decide to take your money.
You can normally take money from your personal and workplace pension from age 60.
At age 60 you can also choose to take 25% of your total pension plan tax-free (this may be a greater percentage under some structures).
One of the main things to remember is that you’re responsible for your investment choices with this type of pension.
We have a helpful guide that explains more about different types of Defined Contribution pension, including pros, cons and things to keep in mind.
How much should I save into a pension plan?
It really depends on how soon you want to retire and what sort of lifestyle you want after you start working less or stop working altogether. It can be tricky to work this out if you are years away, however, we have a few helpful tools that can help you make a more informed decision.
How do tax benefits work with personal pensions?
Money paid into a pension is then invested, which gives it the potential to grow over time. It will also be topped up by the Revenue Commissioners thanks to tax relief.
How much tax relief will I get?
The current tax benefits from the Government make this more attractive than any other form of saving. Here’s an example of how tax relief works in reality and how much tax you could be saving by investing in a pension Plan.
Your monthly pension investment Less tax relief Actual cost to you
EUR 200 40% tax relief* EUR 120
EUR 200 20% tax relief* EUR 160
*Subject to Revenue limits and conditions. Contributions may have to be restricted in order to comply with Revenue limits on maximum benefits.
Limits for tax relief on pension contributions
Tax relief for employee pension contributions is subject to two main limits:
an age-related earnings percentage limit
a total earnings limit.
How to claim the tax relief
If you are a PAYE worker - usually your employer deducts the contributions directly from your pay, and will give you the tax relief due. If your employer does not deduct the contributions, use myAccount (Revenue website) to complete and file an income tax return.
If you are self-employed - sign in to Revenue Online Service ROS to claim tax relief.
Age-related earnings percentage limits
You can get tax relief up to the relevant age-related percentage limit of your earnings in any year.
You might have more than one source of income. If you do, this relief is only from the source of income in respect of which the contributions are made.
Age-related percentage limit for tax relief on pension contributions
Age Percentage limit
Under 30 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
60 or over 40%
For example, an employee who is aged 42 and earns EUR 40,000 can get tax relief on annual pension contributions up to EUR 10,000.
Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.
We are available to discuss your options, and we look forward to hearing from you.
telephone | 091441188 and/or email | office@nelsonlife.ie
RETIREMENT & PENSIONS | INVESTMENTS | FINANCIAL PLANNING | LIFE INSURANCE
Nelson Life Limited trading as Nelson life is regulated by the Central Bank of Ireland.
WARNING: Past performance is not a reliable guide to future performance. WARNING: The value of your investment may go down as well as up. WARNING: You may lose some or all of the money you invest. WARNING: These funds may be affected by changes in currency exchange rates. WARNING: If you invest into this product you will have access until you retire (Pension Products). WARNING: The above content does not constitute investment advice, as it does not take into account the investment objectives, knowledge and experience of financial situation of any particular person. Prospective investors are advised to make their own assessment of the information contained herein and to obtain professional advice suitable to their own individual circumstances. WARNING: The information contained in this document is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for professional tax, legal and investment advice.