Maximise your pension's potential - why now is the time to top-up

You've worked hard, saved smart, and set up a pension. But imagine not just getting by, but having enough money to live the life you want in retirement. Whether it’s travelling, starting a new hobby, or relaxing with family and friends, it’s all possible.

The amount of money you need for retirement in Ireland depends on factors such as when you plan to retire and the kind of lifestyle you want. According to the National Pension Helpline, a basic retirement might need around €22,000 a year for one person to cover essential costs*.

Since the State Pension is around €14,420 a year, you would need to cover the remaining amount with your savings or a private pension**.

Wayne O'Neill, Financial Planning Manager at Zurich Life, says, “Ultimately, we are all responsible for ensuring we have set aside enough money to live the life we desire in retirement.

“Funding your pension ensures that you will have the means to maintain your lifestyle and afford to be able to do the things you would like to do after you stop working.”

Do you need to upgrade your pension?

If you already have a pension, you might be wondering if you should add more to it or make changes. Knowing how much money is in your current pension is crucial.

First, check your annual pension statement. Your pension provider usually sends an annual statement showing your pension's current value, your contributions, fees, and how much your investments have grown. This is a good starting point to see where you stand.

Many pension providers, like Zurich, have online portals where you can check your current pension balance.

If you find you might not have enough for your future plans, or it’s not growing the way you want, you could always ‘top-up’. Topping up your pension simply means putting an extra amount of money into your current pension fund.

Wayne says, “There are some excellent tools available on the Zurich website which are a great help for any customer considering making a pension top-up. But I would say the most important step is to reach out to your financial advisor and start the process.”

Wayne says financial advisors play a key role in terms of helping customers understand their current position and what plan needs to be put in place to achieve their desired income in retirement.

“This will cover several areas such as stage of life, affordability, risk profile, sustainability preferences and other key areas.

“I often hear from customers that they wish they had reached out sooner. Once they are provided with the information, they understand where they are currently and what they need to do to ensure they can maintain their quality of life in retirement.”

The tax benefits of topping up

One of the best reasons to add more to your pension is the tax benefit.

If you pay a higher tax rate, you could get up to 40% back in tax relief. For example, if you put €1,000 into your pension, it might only be a net cost of €600 to you after the tax savings. Likewise, a 20% taxpayer will receive 20% tax relief on their pension contribution.

“This is one of the key factors that differentiates a pension from a standard savings plan,” says Wayne. “It makes topping up your pension very attractive from a tax efficiency perspective.”

By adding more to your pension now, you can increase your future income and also benefit from possible tax savings before the Income Tax Return deadline on 31st October, or 14th November if you file online.

If you make a lump sum contribution to your pension before the deadline, you can also count the contribution against your 2023 income. This is a great way to make the most of your tax savings.

“The earlier you start funding your pension, the better the end result could be due to the effect of compounding interest over the long term.”

Should you switch?

Sometimes a top-up isn’t enough and you might start thinking of switching your pension provider.

Wayne says while he would always recommend speaking with your financial advisor before making any decision to switch, the most significant potential benefit of switching is improved fund performance.

"Over the long term, both fund performance and charges can significantly impact the final value of a fund. Therefore, it is important to carefully consider both when investing."

Switching can be easy and there are different investment options, for example at Zurich, to match various levels of risk, so you can find a plan that fits your retirement goals.

“Really strong performance over the long-term puts Zurich in a very strong place in the market,” says Wayne***. “If it is decided, following consultation with your financial advisor, that switching to Zurich is the best solution for your individual circumstances, we have a very straightforward process to get you set up.”

A good financial advisor will explain where you stand and what steps you need to take to reach your retirement income goals. They can guide you on whether to add more to your pension, switch plans, or take other steps.

As Wayne advises, "There is a much greater chance of maximising your pension’s potential with a clear plan, rather than hoping for the best."

Zurich knows that when it comes to pensions, performance counts. So, choose a pension that can give you the retirement you deserve. If you’re planning to switch or top-up your pension, seek advice. Get in touch with a Zurich financial planner or find a local financial advisor near you with the Zurich Advisor Finder to talk about your options.

The information contained herein is based on Zurich Life’s understanding of current Revenue practice as at 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:

*National Pension Helpline: How much do I need to retire?

**Citizens Information: State Contributory Pension

***Zurich, 30th September 2024.

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