WHAT IS A PENSION?
A pension plan is really a long term investment plan, where you save regularly and build a retirement fund. You will get tax relief on your regular payments that you would not get from other forms of savings.
WHY TAKE OUT A PENSION?
Currently, the single rate state pension is €230.30 per week as at May 2010. When you come to retirement, you may not want to take or face a dramatic drop in your income which may be inevitable. The advantage of contributing to a pension is that you can benefit from tax relief within Revenue limits while you are saving for your retirement at the same time.
HOW DOES A PENSION WORK?
Pensions are mainly provided by life assurance companies and investment firms. Your regular payments are then invested in one or more pension funds. The funds are used to buy and sell assets, such as shares, property, bonds and cash. There are many types of pension funds and each fund is invested in a different mix of these types of assets.
The value of the fund rises and falls, depending on the performance of the assets. Ideally the longer you invest in the pension fund(s), the better. This means that you will benefit from movements in the fund and gives enough time for your fund to recover growth if it falls in value. Generally, the longer you keep your contributions invested, the more likely your fund will grow in value.
WHEN SHOULD I START MY PENSION?
The earlier you start saving for retirement the better. This will allow you more time to save and also you will benefit from the performance of the assets in the fund(s) you invest in.