Have you set up your pension yet? Here’s our step by step guide

September 20, 2022

The Competition and Consumer Protection Commission (CCPC) has published new research which highlights that 38% of adults surveyed do not have a pension plan in place for retirement, with 32% stating that the reason they haven’t set up a pension is simply that they have not got around to setting one up.

Whether you are just starting out in your career or well on the way, check out these four steps to help get you started with your pension.

If in doubt it is always beneficial to speak to a regulated financial adviser for guidance on your pension.

Step 1: Does your employer offer an occupational pension scheme?

The first step is to find out if your job has an occupational pension scheme. An occupational pension scheme is a pension that is set up by an employer for their employees.

If your employer does offer an occupational pension scheme, find out if there are any conditions to being able to join the scheme. Conditions may be length of time employed or whether you are permanent or not.

If your employer does not have an occupational pension scheme they are required to provide access to staff members to at least one standard PRSA (Personal Retirement Savings Account).

A PRSA is a savings account used to save for retirement. Like an occupational pension scheme, the fund is invested by the PRSA provider in order to raise the value of the fund to pay for your retirement.

You should consider discussing PRSA options with a financial adviser.

Step 2: Contributing to your pension

In some cases, you can choose whether you want to make your own contributions to an occupational pension scheme and with some pensions you may be able to make contributions as soon as you start working.

If you have a PRSA, contributions can be made by your employer, by you or both.

If you are not contributing to your pension yet you should consider doing so. Contributions you make to your pension are tax deductible at your standard rate of tax. So, if you are on the lower tax bracket of 20%, for every €100 you put into your pension it is actually only costing you €80. If you pay tax at 40%, every €100 costs you €60. How much you can contribute to your pension is subject to limits sets out by Revenue.

Step 3: Check if your employer is making contributions

Your employer may also contribute to your pension scheme, whether an occupational scheme or a PRSA. If your employer contributes to your PRSA the contribution is treated as a Benefit-in-Kind (BIK).

When it comes to occupational pension schemes your employer will often contribute to the scheme but may also match the employees’ contributions. For example, if an employer is contributing 10% and the employee decides to contribute 1%, the employer may increase their contribution to 11%.

If your employer does match your contributions then the earlier you start making them the more extra employer contributions you will get.

Step 4: Review

The last step is to review your pension frequently to ensure that you are maximising its potential. When reviewing your pension ask yourself:

  • can I make more contributions? – as your salary increases you may consider increasing your pension contributions
  • am I maximising my tax relief on contributions? – you can maximise the tax relief you get on contributions by checking how much you can contribute to your pension annually, as per Revenue limits
  • whether you are just starting out in your career or are well on the way it can be beneficial to speak to a regulated financial adviser to get some guidance when it comes to pensions and other big financial decisions

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