Remember the Special Savings Incentive Account (SSIA)? It’s been ten years since these matured, creating a nest-egg totalling €14 billion.
1.2 million Irish people took one out. It was a no-brainer: every €4 you put in, the state added €1. A five-year savings plan, with a 25% top-up, guaranteed.
The average age of SSIA account holders was 40. Many of the beneficiaries are now in their 50s, and wondering about their pension provision.
Any chance of an SSIA come-back?
Little wonder then that in April of this year, the social protection minister proposed revamping our pensions regime.
The minister’s idea was to replace tax relief (sounds complicated and boring) with an SSIA-style state top-up (sounds like free money).
What the minister didn’t mention is that the current pensions system is substantially more generous than the SSIAs ever were.
Show me the money
For a top-rate taxpayer, the state top-up is 66%: €40 for every €60 of your net income you contribute. And at the standard rate, the top-up is 25%, just like the SSIA.
There are two other great tax benefits too.
Growth in the investments within your pension does not attract tax of any kind.
Secondly, on drawdown, you are entitled to take a 25% lump sum, tax-free from your pension. The remainder will usually be liable to income tax as you draw it down (it depends on income tax exemption limits at that time).
If you’re in your 50s, a pension looks like an SSIA
Most people can access a pension from age 60. So if you are in your 50s, a pension plan already looks like an SSIA. It’s a five(ish)-year savings plan with even more generous state top-ups.
For now, pensions still sound complicated and boring. But if you can get to grips with them, they offer the best tax deal in town.
Moneycube is here to help – we’ve recently launched a pension calculator which can help you take the first steps.
If you’re reluctant to lock your cash away in a pension, regular investment options are still available to you.
Oh, and that minister, by the way? Leo Varadkar. He’s now our Taoiseach, so we may just see an SSIA comeback yet.
Get a grip on your pension with Moneycube today