September – Pensions Awareness Month

September is traditionally Pensions Awareness Month so you should expect to see a lot of advertising over the next few weeks form the Irish Pension Providers.

Pensions Awareness Month, is to raise awareness about retirement planning and to help you take charge of and invest in your long-term savings.

As Local Pension Brokers we represent all the Pension Providers and are Authorised by the Central Bank to give specific advice on the best and most suitable pension for you.

I have kept a list of the most frequent questions I get asked over the last twelve months which I have answered below.

Question: Are pensions taxable?

Answer:  When you retire your pension is treated as earned income and is subject to income tax. However, it is important to remember that you’re usually able to withdraw 25% of your pension pot as a tax-free lump sum. Also, don’t forget you will also have received massive tax relief over all the years you were contributing into your pension fund. Many people will have received 40% tax relief on their contributions yet only pay 20% tax on their pension in retirement if they keep under the band.  

Are pensions worth it?

Yes. Contributing into a pension is a tax-efficient way of preparing your finances for retirement. Even better, your employer might be contributing also.

What happens if I die does my pension vanish?

Answer: No. If you die the pension pot will transfer to the surviving spouse or to your nominated person.  

Pensions:  Can you cash in your pension?

Answer: You can cash in 25% of your pension savings once you reach the age of 50, as a tax-free lump sum, If you previously worked for a company and had a pension.  Generally, it is best to leave your pension invested for when you need it most i.e. in retirement.

When do I start and when is it too late?

The tax relief and gains available are so favourable it is never too early to start. The younger you are when you start will ensure a larger pot in retirement as your contributions will be invested and accumulating tax free for a very long time. It is never too late to start either as the tax reliefs make it very favourable in certain circumstances.

What happens at retirement time?

You will be entitled to take 25% of your accumulated fund tax free. The remaining 75% remains with the pension provider for you to withdraw as you wish. The best advice is to do an annual budget for retirement and then set up a monthly withdrawal to pay for your lifestyle. I meet with my clients annually to set the budget for the following year then we set up the withdrawal accordingly.

The best way to view your private pension is as a top up to your State Pension.

If you have any questions I will be delighted to assist alan@gleeson.ie