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Loan to fund pension

  • 13-04-2016 8:34pm
    #1
    Uncle Mclovin
    Registered Users, Registered Users 2 Posts: 693 ✭✭✭


    Say someone under the age of 30 earning 45k PA but doesn't have cashflow.

    Would it make sense to take a low interest loan from credit union or some other source to pay into a pension.

    Max Pension: 45k at 15% = €6,750k

    Tax relief of €2,400

    Loan of €6,750 over 2 years with AIB works out at interest of about €850

    Doesn't have cashflow at the moment but could afford loan repayments.

    I'm sure there is holes to be picked here.


Comments

  • #2
    Merowig
    Registered Users, Registered Users 2 Posts: 413 ✭✭Merowig


    I would not do that!
    If you don't have a cashflow and an emergency comes up - and you already picked a loan...

    Improve your cashflow/expenses
    check https://www.mabs.ie/ as well

    Create emergency savings worth 6 times of your monthly budget - the rest you can put in a pension / invest / save for a mortage


  • #3
    The Rape of Lucretia
    Closed Accounts Posts: 7,440 ✭✭✭The Rape of Lucretia


    Prompts a hypothetical one though, for someone at the other end of the spectrum approaching retirement and on the top tax rate, say 2-3 years from it, is borrowing money the correct thing to do ?

    i.e. Borrow to a level that the pension lump sum will easily pay off, but the gain is the tax free topup to the pension fund that more than offsets the interest rate of the loan.


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