Your first step to financial wellbeing – making pension planning easy

When you think about your future, do you see yourself lounging around, sipping a refreshing drink, and not worrying about money?

You can have that future if you start planning your pension today. With the right plan in place, you can enjoy the retirement you’ve always wanted.

But if you're in your 20s or 30s and haven't started saving for retirement yet, don't stress, you're not alone. According to the Central Statistics Office, pension coverage is the lowest among young workers, with only 33pc of workers aged 20-24 years having some form of pension coverage*.

For those without a pension plan, 43pc said they couldn't afford it, while another 43pc admitted they just haven't gotten around to setting one up yet or plan to do it later*.

But here’s the thing, there's no better time than right now to start planning for that stress-free future you've always wanted.

Kristen Foran, National Sales Director with Zurich Life, says it’s more important than ever to save for the future: "It’s expensive to live nowadays and we may have a gap in our savings for our retirement due to this.

“But that’s exactly why saving early is key. It’s what can bridge the gap.”

Why start a pension early?

Many people in their 20s and 30s can feel overwhelmed by pensions, with the view that they’re too complicated, too distant, or too expensive to think about right now. But starting a pension early is actually one of the best financial moves you can make, as the maximum State pension is only around €14,420 a year**.

Kristen says the key to growing your pension isn’t just how much you save, but how long your money has to grow. For example, putting aside a small amount in your 20s can result in a bigger pension than someone who starts saving in their 40s.

Pensions work like long-term investments; even by putting in a small amount each month, you can earn returns.

"It’s the idea of compound interest,” Kristen says. “The longer you save and the more time you let your money grow, the better it will be for you.

“For example, if you are 30 right now, and you save approximately €466 a month into your pension, that will give you income when you're 60 of around €13,500 a year on top of your State pension.

“But if you’re 40 and want the same amount in retirement, that jumps to around €740 a month.”***

Kristen explains that when you pay into your pension, you can also get some of that money back through tax relief. The tax relief you get is based on your tax rate: 40pc if you pay the higher rate, or 20pc if you pay the standard rate.

For example, if you’re on the 20pc tax rate, contributing €100 to your pension only costs you €80. If you’re on a higher tax rate, you save even more.

“Your money will also grow tax-free, which is huge as you’re not paying tax on any investment growth. In addition, you may also get a tax-free lump sum on retirement, so the tax advantages are very generous.”

Where to start saving?

“I think there’s lots of worry for people when it comes to pensions, as they think they can be quite complex,” says Kristen. “But a pension is basically like a savings plan, saving for yourself so you’ll have money when you want to retire. But with far more benefits included.”

Zurich offers flexible pension plans that you can tailor to fit your needs and budget, such as a PRSA (Personal Retirement Savings Account), for example.

Understanding pensions doesn’t have to be difficult. If you’re thinking of starting a pension and are not sure what to do, Kristen says research is vital.

“There’s so much great information out there. The Zurich website has a pension calculator where you can see how much you can pay, the kind of tax relief you can expect, and what kind of pension you need.

“Take advice from friends and family and if you do decide to go ahead and talk to a financial advisor, they can point you in the right direction for your circumstances, making it as easy as possible for you.”

And with auto-enrolment soon approaching, in January 2025, people might start thinking about pensions even more.

Auto-enrolment is a new pension scheme for employees who don’t have a pension to be automatically signed up. The employee, their employer, and the Government will each contribute a set amount to the employee’s pension fund.

Kristen says, “This is great news for Ireland, which has been trailing our neighbours in the UK and worldwide. My only word of warning is that it may not be the answer to everything right now.

“Your pension is only as good as what you put in there and how much it can grow over time, and we’ve been waiting a long time for the new scheme.”

Kristen stresses that the earlier you start a pension, the better prepared you could be when you reach retirement.

“Starting early will make a huge difference to your life when you retire. It’s how you can live comfortably in retirement and enjoy everything you want to do.”

Zurich knows that when it comes to pensions, performance counts. So, choose a pension that can give you the retirement you deserve. Get in touch with a Zurich financial advisor or find a local financial advisor near you with the Zurich Advisor Finder to talk about your options for starting a pension, while balancing all of life’s other demands. With a wide range of options, control, and flexibility, you can choose a pension plan that’s right for you!

The information contained herein is based on Zurich Life’s understanding of current Revenue practice as of November 2024 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.

Sources:

*CSO pension coverage, 2023

**Citizens Information: State Pension, 2024

***Life Assurance Association (LIA): The assumptions are: salary inflation of 1.5% p.a. and contributions increase at 1.5% p.a. in line with salary increases. The projected pension assumes inflation of 1% p.a. Charges assumed are for a PRSA: 1% annual management charge and 5% contribution charge. Investment growth of 4.5% p.a. Annuity rates are Single life, 5-year guarantee, indexing at 1% p.a. in retirement assuming 0.5% interest rate.

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