Serving the people of West Cork since 1985

Retirement Planning Advice

Pensions are a type of investment in which you can save for your retirement. Pensions are a great way of making the most of tax relief. If you are under 30, you can contribute up to 15% of your annual salary to a pension fund, and get tax relief on this. So, for example, if you have net relevant earnings* of €20,000 p.a., you can contribute up to €3,000 to a pension fund each year, while it would only cost you a net of €2,400.

As you get older, you can contribute a greater percentage of your salary while still getting full tax relief on these contributions*.

In order to achieve any significant return in investments, you must take a certain level of risk. With pensions, you can basically invest €2,400 a year as a standard rate tax payer, with a return of €600 without any risk. That is a 25% return, risk free, simply by making use of the tax benefits. This of course increases if you are a higher rate tax payer (40%) to a 66% return, risk free.

That is an immediate risk free return of €1,200 on a contribution of €1,800. Bearing in mind that the maximum deposit rates are currently 0.25% for twelve months, these are very attractive returns indeed.

In the case of corporate clients, you can gain tax relief of 12.5% on contributions to an employees pension. Pension contributions are a great way of reducing your tax bill annually.

Maximum net relevant earnings is €115,000 p.a.
**Income tax relief is calculated at your marginal tax bracket(in this example 20%).
***age under 30- 15%
age 30 – 39 – 20%
age 40 – 49 – 25%
age 50 – 54 – 30%
age 55 – 59 – 35%
age 60 + – 40%

Try out our pensions calculator to find out the gap you will be left with if you were to rely solely on the state contributory pension when you reach retirement.

Pensions Calculator