If you are self-employed or in non-pensionable employment (in other words, not eligible to join a pension scheme at work), you are entitled to take out a personal pension.
Pension contributions are eligible for tax relief at your marginal rate, so if you pay tax at the higher rate of 40%, your contributions could cost you just 60% of the amount invested. In other words, for every €1,000 invested in a pension, the net cost to you after tax relief is €600.
There are age and income related limits on contributions to personal pensions, for tax relief purposes. For example, in your 30’s, you may only contribute up to 20% of your income up to a maximum salary cap of €115,000 and receive tax relief.
Please check out our section on Frequently Asked Questions here or why not contact us for more information.
What is a Personal Pension?
A Personal Pension is a pension product designed for self-employed individuals and anyone not eligible to join a pension scheme through their employment.
Who is a Personal Pension suitable for?
Anyone who is self-employed earning an income or not eligible to join a pension scheme at work. If you are already a member of an Occupational Pension Scheme through your Company, you can’t take out a personal pension, unless you have another non-pensionable income.
How much can I contribute?
There is no limit to how much you can contribute but tax relief on contributions is restricted. You will receive full income tax relief at your marginal rate on contributions within the limits as set out below, subject to a salary cap of €115,000
|Your age||% net relevant earnings|
|60 or over||40%|
Can I stop and restart contributions?
Depending on the type of contract you have, you may be able to stop, start, increase and decrease your contributions at any time, although your provider may require prior notice of a change. You may be charged for certain amendments, again depending on your contract. Older pension contracts are not as flexible as newer versions. Most pension providers offer an indexation option as a default, allowing you to automatically increase your regular contributions in line with inflation each year.
How easy is it to change Personal Pension providers?
It should be fairly straight-forward. Be warned however, some contracts have encashment penalties in the first 5 years of the contract. Older contracts may have penalties built in for the duration of the contract. If you are considering switching providers, please take any encashment penalties into account when comparing each product’s projected values to ensure it is in your interests to move.
How are my funds invested?
Your contributions are invested in a range of funds. These funds can be invested in shares, bonds, property and other allowable assets.
Please note that the value of your personal pension can increase or decrease, depending on the performance of these funds and you can lose more than you put in.
So, it’s a risky investment?
All investments carry an element of risk, even those that are supposedly capital secure. To generate a return in excess of inflation and product charges, you will have to accept risk. The level of risk associated with your personal pension will depend on the type of investment strategy you choose.
Your MoneyCoach advisor will help you establish your retirement goals and how much income you will want when you stop work. We will then be able to identify how much risk you will need to take to achieve your goals. If this level of risk is outside your own tolerance of risk, we will adjust either the level of contributions you require to achieve your goals or adjust the level of income you can reasonably expect to have in retirement.
When can I access it?
You can normally start taking your benefits from age 60 (and up to age 75). In certain occupations, you may be able take benefits from the age of 50, or if you can no longer work because of a serious illness or disability.
What are my options at retirement?
At retirement you will be entitled to take up to 25% of your personal pension as a lump sum. The first €200,000 of all lump sums you are entitled to at retirement is tax free and the balance up to €500,000 is taxed at 20%.
You can use the remainder of your fund to either;
Buy an annuity, which is a pension for life
Invest in an Approved Retirement Fund (ARF) which is an ongoing investment
If you have more than one pension plan, you can opt for a blend of an annuity and ARF.
How do I start my Personal Pension?
Please contact us on 01 669 1040 to an arrange an appointment with a financial adviser who will guide you through the full process.