Not sure where to start when it comes to your pension? The CCPC is here to help

September 12, 2022

When trying to get to grips with planning your pension, it can sometimes leave you feeling overwhelmed and unsure of where to start. You may be asking yourself, should I have a pension? Or, what type of pension do I have? Is it a defined contribution or defined benefit pension? How much can I put in and what are the benefits?

To help get you started, check out our four pension videos for beginners. Covering everything from compound interest to tax relief, each video is designed to simplify the basics of pensions to help you on the road to retirement planning.

What is compound interest?

Compound interest is the interest you earn on both the money you invest in your pension pot and on the interest that your pension pot earns. So you are earning interest on top of interest which allows your savings to grow faster over time.

What is a PRSA?

A Personal Retirement Savings Plan (PRSA) is a type of personal pension. However, unlike other types of personal pensions you do not have to be working to invest in a PRSA.  Not all employers have an occupational pension scheme, although they are legally obliged to make a PRSA available to staff. Similar to an employee pension scheme, employees can avail of tax relief for investing in a PRSA. Find out more about personal pensions.

What is the difference between defined contribution and defined benefit?

Both a defined contribution and a defined benefit pension are types of occupational/employer pension schemes. Both schemes are set up by your employer.  The value of a defined contribution pension depends on the amount of money you have invested, how the pension fund has performed over the years and if your employer has also contributed.  The more money invested and the better the pension fund performs, the more money you will receive during retirement.

With a defined benefit pension the money you receive in retirement will be calculated using a formula that takes into account a number of factors, for example, your salary and length of employment. Although you make contributions to your pension, these contributions or the performance of the fund is not used in calculating your pension income.

All pensions are an investment and therefore no amount is 100% guaranteed. For more information read about occupational pension schemes.

What are the tax benefits?

Contributing to your pension enables you to benefit now and in the future.  How you benefit your ‘future self’ is obvious, but how you benefit your ‘current self’ is not something that many of us consider when thinking about pensions. When you contribute to your pension, you will receive  tax relief at source on those contributions, within limits set out by Revenue.

Pensions are complex products and can be difficult to understand. However, they are a very good way to save for your future and ensure you have enough money at retirement.  So it is important to consider getting  financial advice  so you know what you are getting and ensure it is the right pension for you. Pensions are long-term investments so you need to be sure you understand the type of fund you’re investing in, the risks and how suitable it is for your situation.

Find out more about the different types of pensions.

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