The eyes glaze over when the word “pension” is introduced into the conversation but not only is it SO important to address and review no matter what age you are but it happens also to be the current best investment in Ireland bar none…John Lowe of MoneyDoctors.ie has the answers to maximising your pension opportunity.
1, Not starting early enough
Delaying pension contributions can significantly impact the growth of your retirement fund. The earlier you start, the more time your investments have to grow. Even small, regular contributions can accumulate over time, benefiting from compound interest.
2. Failing to avail of employer contributions
If your employer offers a pension scheme with matching contributions, not participating means missing out on free money. Always contribute at least enough to take full advantage of any employer match. If you are straight out of college and the employer offers 5% pension contribution if you match then agree to it. You STILL can invest a further 10% to maximise your tax relief if you can afford it.
3. Overlooking tax relief opportunities
Contributions to pension schemes in Ireland are eligible for tax relief at your marginal rate – 20% or 40%, reducing your taxable income. Ensure you’re contributing enough to benefit from the maximum tax relief available, which can vary based on your age and income. E.g. at age 30 you can invest up to 20% of your annual earnings to maximise that tax relief. So for every € 100 you invest, the government gives you € 40 back so you are up 40% in your pension investment before you even start !
4. Ignoring investment choices
Many pension schemes offer a range of investment options. Failing to review and select the appropriate investment strategy can result in suboptimal returns. For example if you choose a cautious fund like cash or bonds, the returns will not be as good as an equity fund. Regularly assess your investment choices to align with your risk tolerance and retirement goals.
5. Not reviewing pension statements regularly
Pension statements provide valuable information about your retirement savings progress. Regularly reviewing these statements helps you stay informed and make necessary adjustments to your contributions or investment choices. Ignoring them could be a very expensive mistake.
6. Underestimating retirement expenses
It’s easy to assume that expenses will decrease in retirement, but many find that costs remain the same or even increase. Plan for healthcare, leisure activities, and other expenses to ensure a comfortable retirement.
7. Relying solely on the state pension
While the state pension provides a basic income – currently € 289.30 per week, it’s unlikely to be sufficient for a comfortable retirement. Supplementing it with personal or occupational pensions is essential for maintaining your desired lifestyle. Also remember with the demographics in Ireland the likelihood is that in 20 plus years’ time the government then will be unable to pay the ever increasing pensions with less than one third of the workforce at that time than we have now funding it !
8.Not considering inflation
Inflation erodes the purchasing power of your savings over time. Ensure your pension plan accounts for inflation to maintain the value of your retirement income.
9. Failing to update beneficiary information
Life changes such as marriage, divorce, or the birth of children necessitate updates to your pension’s beneficiary designations. Regularly review and update this information to ensure your assets are distributed when the time comes according to your wishes.
10. Not seeking professional advice
Pension planning can be complex, and seeking advice from a financial adviser can help you navigate the options available. Professional guidance ensures you’re making informed decisions that align with your retirement objectives.
Preparing for Auto-Enrolment in 2026
Starting January 1, 2026, Ireland will implement an auto-enrolment pension scheme known as MyFutureFund. This initiative aims to encourage individuals without existing pension schemes to start saving for retirement. Under this scheme, employees aged 23 to 60 earning over €20,000 annually will be automatically enrolled, with contributions from the employee, employer, and the state initially 1.5%, 1.5% and 0.5% from the government…after 10 years it becomes 6%, 6% and 2%… bear in mind as a 30 something year old, you can invest a full 20% yourself to maximise your tax relief.
While auto-enrolment is a step towards enhancing retirement savings, it’s essential not to rely solely on this scheme as the end fund will not be . Consider supplementing it with additional personal or occupational pensions to maximise your retirement income.
By avoiding these common pension mistakes and proactively preparing for auto-enrolment, you can significantly enhance your financial security in retirement. Start early – the earlier the better, take full advantage of available contributions and tax relief, regularly review your pension plan, and seek professional advice to ensure a comfortable and financially secure retirement.