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Dumb Pension Questions

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  • 20-04-2011 5:11pm
    #1
    gavney1
    Closed Accounts Posts: 537 ✭✭✭


    Hi All

    I know very little (if anything) about pensions.

    I'm 26, earning €36K per year, and have no pension whatsoever.

    I don't own any property or anything else worth discussing. Today, I was in the bank to set up a deposit account. I already had a dualsaver account, whereby a certain amount was going in every month on top of a lump sum, but I'm changing to just a regular lump-sum

    The girl selling me the deposit, also suggested a pension. But I've a couple of questions. To me a pension only offers 2 things

    1. Peace of mind & convenience
    2. It's one of many ways to invest money.

    But is it more about convenience than anything else? Like, if I were to disciplined enough to put €400 per month into a deposit account every month for the next 42 years, would that be better/ as good as putting €400 per month into a pension fund for the next 42 years?


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    #2
    bailes
    Registered Users Posts: 52 ✭✭bailes


    Gavney,

    There is no such thing as a dumb question......

    However the reasons why i would start a pension would not be

    1. Peace of mind & convenience
    2. It's one of many ways to invest money

    The main reason for taking out a pension is to ensure you have an income in retirement and to ensure that you are not too dependent on the state pension which you will receive if you pay PRSI for long enough, The state offers you a tax incentive to contribute into a pension fund.

    so assuming you are taxed at 41%, if you contribute €100 a month into a pension investment you will receive a tax credit of €41 per month, or in your example of €400 per month in real terms it would only cost you €236 per month.

    Unfortunately that's the easy bit out of the way, there are an awful lot of other considerations to take into account, Allocation rate, AMC, fund performance and loads of other Jargon.

    the best piece of advice i could give you is to go to an INDEPENDENT BROKER to give you advice on this.

    I am an Independent Broker and if you want some help on this P.M Me and i will steer you in the right direction.

    Hope this helps


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    #3
    broker2008
    Registered Users Posts: 750 ✭✭✭broker2008


    A pension will help to give some financial independence in later life. There is no easy way around this. Once major advantage you have is time. You don't have to put in 400 per month now but in a couple of years you will if you dont start now. I was talking to a lady today who is putting in 40% of her salary because she didnt/couldnt put in contributions in the early years. If you were to put in 400 per month now though.....


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