Pensions in Ireland can get complicated, but truth be told, many of us have the same questions. Moneycube is here to help with our Pensions FAQ! From why you should start one, to cashing it in, and everything in between, here’s Moneycube’s rundown of everything you ever wanted to know about starting a pension in Ireland… but were afraid to ask.
Got a question to add? Email us and we’ll add it to the list!
What is a pension?
A pension is a savings fund with your name on it, used to pay for your retirement. Your money is invested on your behalf by a pension provider. Typically a pension provider will invest your pension into company shares, bonds and property through an investment fund, in order to generate long-term growth.
Do I need a pension?
Most of us need a pension to provide an income when we stop working. What’s more, there are serious tax benefits to saving money in a pension. The State pension provides a minimum income in retirement – but it’s not guaranteed. If you don’t want to work forever, then you need a pension.
At what age should I start a pension?
You can start a pension between the ages of 18 and 75 in Ireland. In practice, most of people pay into a pension to save on income tax once we start working. The earlier you start paying into a pension, the more time your money has to grow.
How does a pension work in Ireland?
When you pay into a pension, your money is invested on your behalf by a pension provider. Typically a pension provider will invest your pension into company shares, bonds and property through an investment fund, in order to generate long-term growth. To learn more, watch our interview with Bonkers.ie on what you need to know about pension plans.
How do pensions save me tax?
Pensions save you tax in three ways: 1. You’ll receive income tax relief on the money you put in. 2. Your pension pot grows tax-free. 3. When you draw down your pension, you can usually receive a lump sum of 25% or more of it free of tax. Here’s the full run-down.
How do I start a pension?
You can start right here! We can help you decide how much to invest, choose an investment fund that’s right for you, and build up your pension wealth over time. Take a look here to get started.
I’m in my 40s – is it too late to start a pension?
Fact is, many people in Ireland reach their 40s before they really start to think about how they’ll afford life when they stop working. Here are five practical steps you can take today to secure your financial future. And if you’re self-employed and in your 40s, there are some specialist pension tips here.
How much should I put in a pension?
Putting as much as you can reasonably afford will save tax and increase your income later in life. But getting started is often the hardest bit. And it’s more important to make a start on your pension, than to try and fix it in one go. Take a look at our pension calculator to see how.
I don’t have much money to spare. Do I still need a pension?
If you can afford to tuck away even a small amount, you’ll be saving tax and investing for your future wealth. Some providers offer pensions from as little as €25 per month, and of course you can increase that in future months and years.
How do I choose a pension fund?
Your pension is invested in funds which aim to grow your long-term wealth. Funds invest in assets like company shares, bonds, commodities, and infrastructure. For most people, a highly diversified fund (or funds), investing in hundreds of underlying assets, is the best approach. This spreads your risk and gives your money multiple ways to grow.
Typically, when you’re a long way from retirement, your pension is invested in higher-risk assets in search of growth (example). As you approach retirement, your money can be moved to lower-risk assets (example).
Can I watch a Pensions FAQ video?
Sure – here it is:
Does auto-enrolment mean I don’t need to start a pension in Ireland?
Auto-enrolment is the practice of automatically signing up workers to pay into a pension. The idea is that by making opting out of a pension the default choice, rather than opting in, people will “do the right thing” and pay into pensions. If you’re serious about your pension, Ireland’s auto-enrolment solution won’t get you there. Here’s why.
Is now a good time to invest in a pension given the current climate?
A pension is likely the longest-term investment you’ll ever make. So don’t be put off by short-term market moves – over the long run, they generally insignificant. If you are investing a lump sum in your pension, it may be prudent to invest it into less volatile assets initially, moving it into higher risk-reward funds in a gradual way over time.
What happens if I never take out a pension?
If you never take out a pension, you’ll be dependent on the State pension. If you’ve paid enough social insurance/ PRSI during your working life, you’ll qualify for the contributory State pension. That’s currently around €13,000. But it’s not guaranteed – and a look at demographics suggests it will be hard to maintain.
Can I put my money into a savings account instead of waiting until retirement to take it out?
You can – but you’ll miss out on substantial tax savings, and investment growth, along the way. If your purpose is to save for your retirement, a pension account is almost certainly the correct approach.
Can I stop and start contributions to my pension anytime?
You can stop, start, and pause your pension anytime as circumstances permit. And you can increase or decrease the amount you’re paying in via monthly direct debit. Although getting into a good regular habit is the key to building pension wealth, pensions these days are flexible.
Is a pension risky? Can I lose money?
Because you’re investing your money for growth, it’s certainly possible that your pension fund can lose money, particularly over the short term. But pensions are for the long term, and invested wisely, should provide meaningful investment growth over the period you are saving into one.
What’s the cost of starting a pension?
There are generally 3 kinds of charges to consider when you start a pension in Ireland. 1. Fund management – the cost of the team who invest your money for long-term growth. 2. Tax wrapper – the cost of providing the pension account. 3. Financial advice – the cost of setting up your pension and receiving ongoing advice.
Pensions at Moneycube generally cost 1-1.25% per year. You can read in detail about our charges here.
How soon can I take my pension?
In general, pensions in Ireland can be taken from age 60, and up to age 70 or 75. In some circumstances, it’s possible to access your pension from age 50.
Can I take my money out of my pension for an emergency before retirement age?
With very few exceptions, it’s not possible to take money out of your pension before retirement. The exceptions are for certain sportspeople who have a relatively short earning career, and very serious ill health. Lastly, if you have been a member of a company pension for less than two years, you can get a refund of the money you paid in, less basic-rate tax (20%)
Can I buy a property as my pension?
It’s possible to buy property within your pension, but it’s becoming increasingly difficult and expensive. In general you’ll need at least €300,000 within your pension, and the property must be bought at arm’s length (eg, on the open market).
Can I invest my pension in cryptocurrency?
In general, the Irish pensions system does not allow for pensions to be invested in cryptocurrency or other digital assets. The focus instead is on liquid assets such as mutual funds/ investment funds.
Could you share the pensions FAQ in Ireland with me in French?
Pourriez-vous m’expliquer le système de retraite irlandais en français? Bien sûr! Découvrez cet article de nos amis du Petit Journal. Il contient tout ce que vous devez savoir sur le démarrage d’une pension en Irlande d’un point de vue francophone.