Pension Advisors Galway
Everyone loves an annual sun holiday, but have you properly considered making arrangements for the longest holiday of your life, your retirement? Our financial advisors provide qualified, carefully considered pensions advice that suits your specific financial and lifestyle needs, giving you complete confidence in your retirement planning.
Pensions, do I need one?
These days generally people are living longer and leading more active lives in retirement. As a result, it is more important than ever for you to think about where your income will come from when you retire. While many people think they can rely on the State pension, the reality is that the State pension is only a safety net and represents less than a third of the average national wage.
Pensions are an essential part of a successful financial plan. A pension is the money that you will live on when you stop working. In effect, it will replace the salary or wages that you earned before retirement.
Your pension is a special type of savings plan, with important tax breaks, that allows you to build up money to provide yourself with an income in retirement. It is a long-term arrangement with restricted access to the funds until you reach retirement age. When you stop working, your salary or earning capacity will come to an end, however the ongoing costs of living will not! It is fair to say that each individual will still need a substantial regular income to maintain a decent standard of living.
So, the question to be asked is ‘where will this income come from’? Unless you have other assets like property, rental income or a large amount of savings your pension (or pensions) will almost certainly be your main source of income once you reach retirement age. We all have ambitious plans to provide ourselves with a secure income in retirement so it is important to make sure you get the right pension advice to help you achieve your financial and lifestyle goals.
Retirement planning remains of the few ways in which an individual or company can make retirement provisions in a tax efficient manner. There are a myriad of rules and regulations governing pensions. Getting impartial expert advice will help ensure that your retirement planning is structured to maximise the planning benefits available. Just look at the benefits of a pension – generous tax relief, often free employer contributions, tax free investment returns and the opportunity to take a large part of your pension fund back as tax free cash when you retire. Most people underestimate how much they will need to save to provide an adequate income when they reach retirement age. That is why our financial advisors provide pension advice tailored to your specific circumstances.
- What do you want to do in retirement?
- What are your goals?
- What do you want to spend your money on?
- How much do you need so you can do everything you want?
- What assets and sources of income do you already have, including savings, property and your business?
- What is the shortfall between what you have and what you need?
- What are the most tax efficient ways of bridging that shortfall?
The earlier you start a pension and your retirement planning, the easier it could be to build up your fund, which will allow you enjoy a comfortable retirement. The first step is to estimate what your monthly pension savings should be to help secure the future you want. With your personal financial advisor at Hennelly Finance, you can be guaranteed of qualified, independent pension advice that can help secure your future.
Start early for larger pensions
When you are in your twenties, saving part of your hard-earned weekly wage for retirement seems like it can wait. As life moves on and we accrue more commitments in the form of family, mortgages and other loans, pension schemes can be even less of a priority. However, the earlier you start a pension the less money you will have to contribute to your plan thanks to compound interest. Compound interest occurs when interest is paid on the interest attached to your principal sum. Rather than paying out your interest, it is reinvested so that earnings are made on both your pension savings and also your previously-accumulated interest. Over a longer period of time, pension schemes that work on compound interest can make a significant difference to financial outcomes and may require less investment than a pension started later in life.
The graph below shows the difference between someone who started their pension savings at 25, versus someone who started at 45, who effectively has less than half their younger peer at retirement age.
Source: The Pensions Authority
Getting pension advice and starting a pension early has a number of other benefits
1. The earlier you start the greater will be your pension fund at retirement.
2. Income Tax relief on your contributions kicks in immediately you start – so, you pay less Income Tax while, at the same time, building up your pension fund.
3. For this reason, successive governments continue to grant generous TAX RELIEF on pension contributions in order to encourage the working population to provide for retirement. If you’ve recently changed jobs, added to your family or adjusted the payments you’ve been making to your pension plan, it is time to review whether you’re still on track to reaching your retirement goals. Like any nest egg, pensions need to be nurtured.
When providing pension advice our finance advisors consider the following:
- Have you changed jobs?
- Has your income increased?
- Do you have dependants?
- Did you start your pension with a low contribution with the aim of increasing it?
- Have you stopped paying into your pension plan?
- Are you happy with your current pension provider?
If your circumstances have changed since you took out your pension plan or last reviewed it, speak with one of our qualified finance advisors to for expert pension advice and make sure your retirement plans are still on track.
Reaching retirement age
Once you reach retirement, your earned income is replaced by the income produced by your pension fund. You will have a number of important decisions to make to ensure that your fund at retirement will provide a secure income for the rest of your life. You may be able to choose what to do with your retirement fund depending on your individual circumstances. There are two key factors you will need to consider: how you wish to use your pension fund to provide an income in your retirement, and whether you wish to pass the balance of your fund to your dependants after your death.
Most people will choose to take the very attractive tax-free lump sum option of up to €200,000 from their pension fund (subject to Revenue rules) and use the balance to meet their financial needs in retirement through one of three further retirement options:
- Purchasing a pension (also known as an Annuity)
- Investing in an Approved Retirement Fund (ARF) or taking a taxable lump sum.
- The option that is right for you at your retirement age will depend on many factors, including:
- The size of your pension;
- The level of income you and your spouse/civil partner/dependant will need during your retirement years;
- The amount of other assets – apart from your retirement fund – that you have to fall back on; whether investment growth or security is more important to you during your retirement years; whether you wish to pass your retirement fund on to your dependants; and our state of health.
Before you make a decision about the proceeds of your pension scheme, be sure to get in touch with one of our finance advisors for qualified pension advice. We can offer you a complete financial review, which will help strengthen your retirement planning and choose the pension scheme that best suits your needs.
Pensions and moving jobs
With today’s workforce being much more mobile, it can be difficult to locate exactly your various pension savings. This issue is further exacerbated for those who have lived and worked abroad. Forgotten or misplaced pensions can result in people reaching retirement age and missing out on pension income that could make a big difference to their standard of living.
While most people should be able to remember the jobs they had throughout the course of their working life, they may not remember who looked after the pension scheme they contributed to. Their employer may also have merged or closed down, so it can be difficult to know where to even start looking. One of the most common mistakes people make is believing that tracing pensions from previous employers is simply not worth the effort. This can often be a costly mistake to make. If you and your employers have paid into pensions for even just a
few years, depending on when those pensions commenced, significant sums may have accrued.
Here are some steps you can take to ensure you don’t lose out on any pension savings accumulated over your working life.
- It is almost always in your best interest to join an employer’s pension scheme as the employer will be paying into it. Once you have been in it for two years, you have a legal entitlement to the value of it. The fact that you don’t see yourself with that particular employer until retirement age does not mean you can’t benefit.
- Try to hold on to some of the pension documentation as that will have contact details that should help if you need to trace your pensions in the future. Discarding communication from a pension administrator can make the effort of tracking it down much greater.
- Make sure whoever administers your pension scheme has your up-to-date address. Keep a list of companies to notify when you move. Also try to make sure these companies have contact details that are unlikely to change, such as personal email addresses or mobile numbers. Once your pension is due to be paid, the trustees have a legal duty to pay it and will make some efforts to find you. However, that will be difficult if you have moved from the address that they have on file for you – and it will be even more difficult if you are living abroad.
- While you are still employed, you get an annual statement setting out your benefits and the main contact details for the scheme. However, once you leave that employer, you no longer automatically receive that information. You can ask for updates on your pension from the pension scheme administrator and they are obliged to provide these to you. You should do this at regular stages to help plan for retirement.
- You have the right to transfer any past pension benefits you have into your current pension. Talk to your new employer and get independent financial advice, as it doesn’t always make financial sense to transfer.
- If you are having difficulty working out where your past pension are, contact former colleagues or the regulator, the Pensions Authority. Our finance advisors provide independent pension advice tailored to your own personal circumstances that can help strengthen your retirement planning and options at retirement age. We can also help track down your past pensions. To speak with a member of our team, Call us at 091 670123