Plan your pension, your future self will thank you for it

In the words of Benjamin Franklin, ‘An ounce of prevention is worth a pound of cure.’ The same logic applies to financial planning, particularly when thinking about retirement.

The earlier you start or upgrade your pension, the more your future self will thank you for it.

According to a survey by iReach Insights on behalf of Zurich, which examined the attitudes of adults towards paying into a pension, 53pc of workers believe your 20s is the best time to start saving for retirement. But there has been a marked increase in those selecting ‘in your 30s’ to start a pension, up from 26pc in 2022 to 31pc in 2023*.

The earlier you start contributing, the longer your money has to grow. And Marie Kirwan, Senior Financial Planner at Zurich, says delaying your pension planning can be costly.

"The longer you wait to begin, the more you have to contribute to achieve the same retirement goals," says Marie. “I might retire in 30 years, but I might live for another 30 years after that. So, what would I live off?

“That's what you have to think about. If you want €30,000 a year in retirement, the earlier you start, the more time you have to take advantage of compounded fund growth and tax relief on your contributions.”

Marie says the advantages of starting early can't be overstated. It's not just about the amount, it's about the time it has to grow.

According to Marie, there is no such thing as being 'too young' for pension planning either, “The moment you start paying tax, you should think about starting a pension.”

Tax benefits

One of the major benefits of contributing to a pension is tax-efficiency. The contributions you make to your pension fund are not taxed. Basically, money that would have gone to the taxman is instead working for you, helping to grow your pension pot.

For example, if you’re on the standard rate of income tax (20pc), every €100 you contribute to your pension could cost you just €80 after tax relief. If you're on the higher rate (40pc), it could cost you even less, just €60 for every €100 you contribute.

Highlighting the tax benefits of pensions, Marie says, “You get tax relief on contributions, tax-free growth during the life of the pension policy, and a percentage of your fund can be taken as a tax-free lump sum at retirement.”

She also emphasises the compounded growth over time, which can significantly increase the value of the pension.

Some might think, ‘I can’t save much right now, so what's the point?’ But even small contributions can grow significantly over time, thanks to compound interest. Plus, as you progress in your career and possibly earn more, you can increase those contributions.

Marie adds, “The key is establishing the habit of saving early.”

Pension changes

Marie Kirwan, who has over a decade of experience in the financial planning world, says there are changes coming to the pensions landscape such as the auto-enrolment system being planned to roll out in late 2024.

This new pension system means people who do not have a pension scheme, earn more than €20,000 per year and are aged between 23 and 60, will be automatically enrolled into a pension**. This means that they will have extra money when they retire and won’t have to rely on the state pension alone.

So why not just wait until auto-enrolment starts and you will automatically be enrolled into a pension? Marie says waiting for it means losing out on valuable time and potential savings.

“Auto-enrolment was supposed to be here three years ago, and its introduction keeps being pushed down the road,” says Marie. “It is certainly a step in the right direction as it ensures more of us have some form of pension in place.

“But it’s dangerous to let your financial future be dictated by timing and legislation. It could easily be pushed out again and you lose yet another year or two where you could have been contributing and earning tax-free growth.”

The earlier you start, the more you'll have accumulated by the time you retire. Why wait for an external push when you can act now and be miles ahead in the future?

Every little bit helps

As Marie says, “Every situation is different.” And in every situation, she says it’s important to ensure her clients are well-prepared for their financial future.

“Life changes, and as it does, reviewing your pension is crucial. Depending on your age and circumstances, it could be every year or even every six months.”

And Zurich offers flexibility tailored to every situation. “Zurich has pensions to match every lifestyle. Whether it's a young professional just starting out, a company director, a self-employed person, or someone later in life, Zurich offers options that cater to everyone.

“Setting up a pension can seem challenging, but once done, it's a relief. Knowing that, heaven forbid, if something happens to you, your pension passes on to your loved ones too, can give people peace of mind.”

But Marie says flexibility is also vital in a pension. Pensions can be amended based on your circumstances. It's paramount that it's invested correctly and aligned with your retirement goals.

Marie adds that speaking to an experienced financial advisor in Zurich or a financial broker, can help guide you through the oftentimes confusing world of pensions.

"There's a pension out there for everyone. The key is getting the correct financial advice."

Your retirement may feel like it’s too far away to be concerned about, especially if you're in the early stages of your career. However, the choices you make today can significantly shape your future.

Taking a small action today and speaking to Zurich or a financial broker could have a great impact on your future. With a wide range of options, control and flexibility, you can choose a pension plan that’s right for you here.

If you’re wondering where to start, you can find a local financial advisor near you with the Zurich Advisor Finder here.

*Source: iReach pension survey, August 2023

**Source: https://www.gov.ie/en/campaigns/0ab04-automatic-enrolment-for-pensions-hub/, 12th September 2023.

The information contained herein is based on Zurich Life’s understanding of current Revenue practice as of 1st October 2023 and may change in the future.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.

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