Starting a pension at 45

Littlehorny

As the title says I unfortunately have never got a private pension sorted for myself but am in a very steady job now and my mortgage is manageable.
Am I too late starting? I know the company does contribute to your pension as well so it's good to get a little more that way.
Basically I need to know should I start one? How much would I need to contributing weekly? Or would I be better off setting up a direct debit into a savings account and try and save up a lump sum?
Thanks very much in advance.

cdeb

Probably no harm starting now. I suppose the question is why not?

What you put in depends on your financial position. At your age, you can put a max of 25% into the pot and get tax relief - https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx

The company won't match the full 25% obviously, but it's free money.

There's nothing in savings accounts these days. A pension will likely earn more, though if a property crash is on the way, you may lose value in that. But in that case, there should be time for the pension to recover before it matures.

NIMAN

45 is very late these days to be starting a pension, but I suppose better late than never is a good adage here.

You'll likely have to put away a good percentage of your salary to get any sort of return.

jonnybravo

Am I too late starting?

You are late but better late than never.

Basically I need to know should I start one?

Yes. Hopefully your employer contributes to a pension too.

How much would I need to contributing weekly?

As much as you can afford up to your tax free limit.

Or would I be better off setting up a direct debit into a savings account and try and save up a lump sum?

Better off contributing to a pension as you get a tax deduction and hopefully your employer will contribute too.

Littlehorny

^^^Thank you so much. Clear concise advice, the way I like it

Littlehorny

Littlehorny wrote: »

........How much would I need to contributing weekly? ...........

Using very crude figures........... €200k fund after you take 25% tax free lump sum would provide roughly €6k/annum from aged 65 on.

Assuming 5 or 6 % growth per annum over 20 years & normal enough charges you'd want to be throwing in €100k at least so that's €100/week ish.

I didn't account for inflation in my crude figures

theyoungchap

Put as much as you can afford per month away. The tax relief is incredible and not to be sneezed at. Better late than never.

D3V!L

I'm in a similar boat. I'm going to be 40 next year and due to various set backs i'll be starting my pension then. I dont have a clue about them, dont have any dependents etc so I'll be able to put a good sum into it. Is there a limit to what you can put into it monthly ?

theyoungchap

D3V!L wrote: »

I'm in a similar boat. I'm going to be 40 next year and due to various set backs i'll be starting my pension then. I dont have a clue about them, dont have any dependents etc so I'll be able to put a good sum into it. Is there a limit to what you can put into it monthly ?

You can put up to 20% of your salary tax free (including AVC's - annual voluntary contributions) into a pension afaik. 40-45 is late to the show but not the end of the world either, pay as much in as you can afford!

I put any bonus, etc in to my pension. Otherwise Pafchal takes half of it!

Liam D Ferguson

A few general points that are relevant to several of the people who have posted here: -

• The main attraction of saving into a pension as distinct from just saving up your money in the Post Office or a bank account is the tax relief. It's very attractive and is one of the few remaining places you can get a tax break.
• You can get tax relief at your highest rate on your contributions. So if you're a higher rate taxpayer you'll get €40 tax relief for every €100 you put into your pension.
• So if you put €100 into a pension, it costs you €60. If you put €100 into your savings account, it costs you €100.
• But it's not a complete giveaway. When you retire, you can take 25% of your pension fund out as a lump sum. This is tax-free, up to €200,000. The balance of your fund is used to provide you with a pension. There are several methods of doing this. Whatever method you choose, your pension income will be assessable for tax. Maybe you will be tax exempt in retirement. Maybe you will be on the low rate of tax. Or maybe you will be on the higher rate. It all depends on how much income you (and your spouse, if applicable) will have when you retire, typically from pensions, perhaps rents from properties, dividend income from shares etc. Anything that is assessable for Income Tax will be added up to determine what rate of tax (if any) you'll pay in retirement.
• Some employers will contribute a percentage of your salary to a pension for you. Some won't. Check if yours does. If they do, take it. It's free money.
• If your employer doesn't have a pension scheme that they will pay into, then it's up to you to choose your own. Or if you're self-employed, it's up to you to choose your own.
• If you're choosing your own, there are three things you need to look at. (1) Charges. Typically, there are two forms of charges: a charge on each contribution as you make it and an annual charge. There's a load of jargon, smoke and mirrors in this industry. Whoever you're dealing with, get them to explain the charges to you in terms you can understand. As a benchmark, a Standard Personal Retirement Savings Account (PRSA) can have charges of up to 5% per contribution and 1% of the fund per year. As a very general rule of thumb, avoid anything charging more than that. And depending on the amount you're contributing and your age, you can probably do better than that.
• Second thing to be looking at is how much of a contribution you're going to put in. You can get tax relief up to 20% of salary in your 30s and 25% in your 40s. Lower percentages for younger and higher for older. If you can afford to avail of this tax relief in full, without sacrificing more immediate needs, do. If your employer requires you to put in an amount in order for them to contribute, put in that amount so that you'll get the full employer contribution.
• Third thing you need to look as is the choice of fund. There's a huge choice. A lot comes down to how much risk you're willing to take with your pension savings, in return for the potential for a higher return over time. There are "lifestyle strategies" which will start you off in higher-risk funds when you're younger and will switch you into lower-risk funds as you get closer to retirement. Or you can manage it all yourself.
• Beware of anyone who tries to tell you that you should go with Pension Company A rather than Pension Company B because A will give a better investment return in the future than B. If that was verifiably true, then B would go out of business. Even if A has outperformed B in the past, it doesn't follow that they will definitely do so in the future. Choose based on tangible verifiable facts, not opinions or predictions.
• There's no such thing as a low-risk investment with high potential returns. That's the unicorn of the investment business. If you want a very safe, low-risk investment you can have it. But accept that, particularly now, the returns you'll get will be low. If you want the potential for a better return, you can have that. But accept that it carries higher risk.

Hope this helps.

Regards,

Liam

Liam D Ferguson

Liam D Ferguson wrote: »

A few general points that are relevant to several of the people who have posted here: -
.........

A great post, thank you Liam.

lsjmhar

Get independent financial advice from a qfa person. They will look at Ur current position, Ur future plans and look through various options with different companies. U can consider which u want at that stage.

If u needed Ur appendix out would u ask someone on boards????

theyoungchap

Yeah and pay somebody for the advice - otherwise you'll get advice from someone with a seriously vested interest who will sell you products on commission