What is a Pension?

At first look, pensions can seem very confusing with all the different options that are available. Whether you’re just starting your career or are nearing retirement, understanding how pensions work is important, especially in Ireland. At askpaul, we can take you through your pension options at retirement to help you make the right choices for you.

How much pension do I need?

The right amount for your pension involves understanding your current financial situation, setting realistic retirement goals and calculating future expenses. This is where financial planning consultations can be invaluable.

Our experts will help you figure out, by reviewing your income, savings and lifestyle aspirations:

1. Current Financial Health: Assess your savings, investments, and debt.
2. Retirement Goals: Define what kind of lifestyle you want post-retirement.
3. Future Expenses: Estimate the costs of healthcare, living expenses, and leisure activities.

This well-rounded approach guarantees that not only are you saving enough, but you are also saving smart to make the most of your money.

How do pensions work in Ireland?

In Ireland, there are a number of pension options. These include:

State Pension

The State Pension in Ireland is designed to provide some basic income in retirement. Here’s how it works:

• Eligibility: You must have at least 10 years of PRSI contributions to qualify, with full benefits requiring 40 years.
• Quantity: The maximum State Pension (Contributory) currently pays approximately €248.30 per week, which might not be sufficient to provide the standard of living you’re used to.
• Limitations: The State Pension is not designed to be your only source of income in retirement. It’s a safety net, rather than a complete retirement plan. You might find retirement finances tight, especially with increasing living costs, if you solely rely on the State Pension.

Occupational Pension Schemes
These are usually provided by your employer and can greatly add to your retirement income:

1. Defined Benefit Schemes: These schemes offer a guaranteed income in retirement, which is often related to your level of salary and/or years of service. They are less common nowadays because they are expensive for employers to operate.

2. Defined Contribution Schemes: The contributions are invested herein, and the eventual pension depends on the investment performance. They are more flexible but also carry some investment risk.

Pros and Cons:
DB Schemes: They provide certainty but are less portable if one changes jobs frequently.
DC Schemes: These schemes are more portable and flexible but require active management and come with market risk.

Personal Retirement Savings Accounts (PRSAs)

PRSAs are designed to put you in control of your retirement. You can decide how your contributions are invested and take your PRSA with you from job to job. You get tax relief on your contributions, and the investments grow tax-free until you withdraw your money.

Pros: Flexible, portable and tax-efficient.
Cons: You have to manage it yourself and understand the investment options.

Auto-Enrolment

From September 2025, Ireland is introducing an auto-enrolment pension scheme that will get more workers saving for retirement. Those eligible to be automatically enrolled into a pension scheme are employees aged 23 to 60, earning more than €20,000 annually. The employee and employer will both contribute, while the State will also provide a top-up.

This initiative will improve pension coverage, ensuring that more people have a nest egg at the end of their working life.

Navigating the pension landscape in Ireland might seem daunting, but you’re not alone. At askpaul, we’re here to help you make informed decisions about your retirement, ensuring your golden years are secure and enjoyable. Whether you’re just starting out or need to adjust your current plan, our pension consultation services are tailored to meet you where you are in your financial journey.