By Dave Kavanagh
A hugely important topic is planning for retirement. Unless you want to try and live on a mediocre state pension for what is likely to be over a third of your adult life, it would be wise to make your own plans and plan early. Obviously, the longer you contribute to a pension, the more you will have when you retire. One of the most attractive aspects is the tax relief on contributions at your marginal rate. This means that for anyone on the 40% tax rate, every €100 you contribute is only costing you €60. Another way of looking at that is that your €60 has grown by just over 66% to €100 the moment you have put it in! The other tax incentives, are that pension funds are invested in a tax-free environment and you can also take a tax-free lump sum at retirement stage.
If you’re fortunate enough to already be in a company pension scheme or a superannuation, that is great (although depending on your length of service, you may want to supplement your fund by paying AVCs (additional voluntary contributions)). The people that administer your pension scheme should be able to provide you with information about that. If you have your own limited company, you can set up your own scheme and allow the company to pay for all or some of the contributions. For everybody else, You can set up a personal pension or a PRSA (personal retirement savings account) and still get the tax relief. Self employed - One option that many self-employed people avail of, is to pay an annual amount into a pension in order to reduce their tax bill. Usually, they would have up to 31st October in the current year in order reduce their 2019 tax bill, but due to Covid-19, for those filing and paying online to Revenue, they will have more time to do this.
Dave Kavanagh QFA has been advising people financially for over 25 years. For quotes or information (with no cost or obligation) he can be contacted by emailing firstname.lastname@example.org or use the contact form on www.financialcompanion.ie or phone 087-6414570, or @Davekav_advice on Twitter and Instagram. Combined with his previous role of gym/nutrition adviser, he regularly gives talks and workshops at seminars and events for groups, companies and government departments on financial wellbeing, positivity and motivation. As heard on RTE 2FM and TV3