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Planning for Retirement

Pensions Information

Whether we like to think about it or not, retirement becomes a reality for the majority of us. The good news is that people retiring today tend to live longer and fuller lives than before. In order for us to have the type of lifestyle we would like in retirement we need to plan and save for it, and a pension is one way of doing that.

As we are an ageing population in Ireland, it is important that individuals make adequate provision for their retirement. To encourage private pension coverage the Government offers tax relief on pension savings. In 2003 legislation was introduced which made it obligatory for employers to provide access, as a minimum, to a pension for all employees.

For anyone running and managing their own business in the restaurant or hospitality sector it is important that they understand their obligations towards employees and the pension options for their own future.

Employer Obligations

Since 2003 employers are obliged, by law, to provide all employees with access to a pension. Where there is no company pension in place or where some employees can not access that company pension the employer must allow access to a Personal Retirement Savings Account (PRSA) provider.

The obligations involved in providing access to a PRSA provider consist of three simple steps on the part of the employer -

  • To assign a PRSA provider*- this involves the employer contacting a provider and establishing an individual within the provider as their contact point.
  • To issue the PRSA provider and contact details to the employees and to allow them time during working hours to make contact with the provider and get the information they need.
  • If the employee decides to start contributing to a PRSA with the designated provider the employer must make the relevant deductions from payroll.

Please note the employer is NOT obliged to make any contributions to the employees’ pension but they must provide this access to all employees including part-time/ seasonal workers.

The Pensions Board will issue on-the-spot fines and prosecute any businesses found in breach of their obligations. Further information is available from the Pensions Board’s booklet PRSAs Employers’ Obligations from the website www.pensionsboard.ie and you can also check-out the Trustee and Employer Checklist.
*A list of all providers is available on the Pensions Board website – www.pensionsboard.ie

Private Pensions

Pensions are by their very nature a long-term investment. Over the lifetime of a pension, which could be thirty to forty years, there will be times of high returns as well as low returns. This is to be expected with all investments and pensions are no different.

For those who have started planning for retirement and are investing in a pension it is important to have an understanding as to the investment choices and risks being made on their behalf. As mentioned above we’re living longer, the average person retiring tomorrow aged 65 years has a life expectancy of a further 20 – 23 years, this, coupled with increases in the standard of living means that the cost of funding your retirement is growing. It is therefore important that you continue to engage with your pension whilst you’re contributing to it during your working life, to ensure that you will receive an adequate pension in retirement. This is of even greater significance for those nearing retirement age, with five to ten years to go to retirement. The Pensions Board recommends that lower risk options be made available to scheme members as they approach retirement so that the growth experienced can be realised.

Different Types of Pensions

  • Personal Retirement Savings Accounts (PRSAs) which are private pension plans set-up between the individual and an authorized PRSA provider. PRSAs are a type of defined contribution scheme, the value of which on retirement is determined by the level of contributions paid, the investment return achieved and less the fees and charges. There are two types of PRSA –
    • Standard PRSA – the charges are capped on the contributions made, there are restrictions on the type of funds in which the contributions can be invested and there is no compulsion to purchase any other products when applying for a Standard PRSA.
    • Non-Standard PRSA – there is no limit on charges and investments can be made in a range of funds.
  • Retirement Annuity Contracts (RACs) are private pension plans set up between the individual and an RAC provider. RACs are a type of defined contribution scheme, the value of which on retirement is determined by the level of contributions paid, the investment return achieved and less the fees and charges.
  • Occupational/ Company pension schemes which are set-up by the employer and can be a
    • Defined benefit scheme – providing a defined level of pension benefit at retirement, usually based on years of service and earnings at retirement. Benefits can be affected if the pension scheme is not fully funded.
    • Defined contribution scheme –the amount at retirement is defined by the contributions made, the return on the investment, less the fees and charges, where applied.
    • Hybrid scheme – is a pension scheme which is neither a full defined benefit nor a full defined contribution scheme, but has some characteristics of each.

The Tax Relief

One of the more immediate benefits of contributing to a pension is the tax relief. This relief proves pensions to be one of the most tax efficient ways of saving for the future.

Highest age at any time during the tax year Limit
Under 30 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
60 and over 40%

Note: Contributions will also be relieved from PRSI and the Health Levy, if you pay these charges.

Tax relief is available on the pension contributions, the investment gains and most pension schemes currently allow for a tax free lump sum in retirement usually at 25%. It is generally recognised that the older you get your outgoings start to reduce. In order to incentivise you to allocate more of that income towards retirement the percentage limits of your salary which can be invested in a pension are increased, thereby increasing the tax relief available in accordance with your highest rate of tax – please see the table below.

Further Information

The Pensions Board’s website www.pensionsboard.ie provides a range of information and resources including –

  • Pension calculators – The Pension Calculator allows you to insert basic personal information such as your age, current salary, and the value of the fund (if any) invested to date and your target pension as a percentage of your pre-retirement salary. The calculator will then estimate the monthly contributions needed to provide for their pension at retirement. There are savings and advanced pension calculators available on the website also.
  • Information Booklets – the Pensions Board also offers a range of booklet free to download from the website including
  • The Pension checklist – which provides a quick snapshot of the ten different questions you should ask yourself about planning for retirement and pensions.

If you have any further queries you can contact the Pensions Board at
Locall: 1890 65 65 65
The Pensions Board, Verschoyle House, Lower Mount Street, Dublin 2

You should also talk to your bank, insurance company, building society, financial advisor about pensions today.

About the Pensions Board

The Pensions Board was established under the Pensions Act 1990, and aims to: 

  • promote the security and protection of members of occupational pension schemes, trust RACs and contributors to Personal Retirement Savings Accounts, in accordance with the Pensions Act, 1990, as amended
  • promote the development of efficient national pension structures
  • promote a level of participation in the national pension system which enables all citizens to acquire an adequate retirement income
  • provide information and authoritative guidance to relevant parties in support of pension security, structures and participation.

About the National Pensions Awareness Campaign (NPAC)

The Pensions Board, on behalf of the Government, organizes the National Pensions Awareness Campaign which aims to

  • encourage greater awareness and understanding of pensions among the general public and specific groups where pension coverage is low
  • increase the numbers addressing the adequacy of their pension provision
  • progress development of financial education planning and programmes in Ireland.

NPAC runs a number of initiatives and programmes with representative and organizational groups, attending various seminars and events, as well as promotion and advertising campaigns.

 

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