Pension tension!
At a recent industry conference the Finance Minister Michael Noonan said that the relatively low take up of private pensions is a major concern for the Government.
He stated that as the certainty in the area of tax relief had now been delivered it was imperative that the pension industry encourage low-and middle-income earners to invest in their future retirement.
He said that about half of all workers aged between 20 and 69 had private pensions however he did warn that this figure may have slipped lower than this because of the financial difficulties faced by hard-pressed families.
The ministers sentiments are commendable however there are a number of combined factors which exacerbate this age old problem. For starters we are living longer, saving less and with people strapped for cash, and no upturn in sight given the introduction of new taxes such as property and water charges, long-term saving in the form of pensions is increasingly being put on the long finger.
Yes, having less money is a significant contributory factor but consider that in 2008 Irish pension funds lost 40% of their value as bank stocks collapsed leaving many pension holders disillusioned. So much so that people are now reluctant to put whatever spare cash they might have into pension funds.
A further debilitating fact is that many people saw themselves as savers when putting money by for pension provision however the pension industry saw them as investors hence people were exposed to more risk than perhaps they had the appetite for!
However with all the above being right the simple fact still remains for all of us in the private sector....who is going fund for our retirement if we do not take up the reigns and do so ourselves? Make the most of the attractive tax relief's available to ensure that your retirement nest egg is adequate when you retire.
Here are 5 key messages that may help you with these plans:
1. Retirement plans can reduce your tax bill
Investing money into a retirement plan is a sensible option for all because unlike a deposit account where you pay DIRT on any growth, with a pension, you actually get tax back! All contributions to a pension are eligible for tax relief at either 20% or 41% depending on your tax bracket and up to the relevant ceilings.
2. Retirement age has increased
If you are under 50, the minimum qualifying age for the State Pension has risen to 68. So you should start to make plans now to bridge the gap if you intend to stop working at 65 or even 60.
3. Pension funds performing well
As I eluded to earlier pension funds in 2008/09 fell heavily however many pension funds have performed strongly since 2009 with typical funds generating a gain of over 20% over the last 12 months according to a Mercer Pooled Fund Survey. There are also alternative deposit-style pension solutions which might be better for you.
4. Planning is key
It is vital that you get the right advice, and in writing, which will help you put a retirement plan in place that will act as a road map that you can revisit regularly.
5. Reviewing is a must
A tip is to review your retirement plan each time you get your car serviced. It's a useful trigger and it should ensure you don't forget this fundamental yet crucial aspect of your personal finances.
To conclude with a quote...."entrepreneurship is living a few years of your life like most people won't so you can spend the rest of your life like most people can't". To do this, you need to allow time to plan for the future.
Can you afford to leave your future to chance? Please complete the attached enquiry form or contact Alasdair directly on 01-810 1912 or via info@agsfinancial.ie and he will happily create a retirement plan for you or review your existing retirement road map.